Bond Market Update

Selling Continues

• U.S. Treasuries have faced continued pressure since the release of the solid April jobs report (177,000; Briefing.com consensus 130,000) with shorter tenors maintaining their lead to the downside. Today's selling has lifted the 2-yr yield to a one-week high just two days after the 2-yr yield settled at its lowest level since late September. Notably, today's retreat has been sharp enough to prompt a reduction in rate cut bets. The fed funds futures market now sees just a 36.6% implied likelihood of a rate cut in June, down from 58.2% yesterday. The fed funds futures market now expects the next cut to be made at the end of July. The FOMC will also meet next week, but expectations for a cut are nonexistent.
• Yield Check:
  • 2-yr: +14 bps to 3.84%
  • 3-yr: +15 bps to 3.83%
  • 5-yr: +13 bps to 3.94%
  • 10-yr: +10 bps to 4.33%
  • 30-yr: +6 bps to 4.80%