Bond Market Update

Short End Maintains Lead

• U.S. Treasuries have climbed off their lows that were reached about two hours after the release of an in-line CPI report for July. The bounce off lows has returned the 10-yr yield to its opening level while the 30-yr yield remains above its starting mark. Shorter tenors have stayed ahead since the report's release with the 2-yr yield sitting closer to its low than its opening high. The outperformance up front is consistent with strengthening expectations for a September rate cut with the fed funds futures market now seeing a 94.1% implied likelihood of a 25-bps cut on September 17, up from yesterday's 85.9%.
• Yield Check:
  • 2-yr: -2 bps to 3.73%
  • 3-yr: -1 bp to 3.71%
  • 5-yr: UNCH at 3.83%
  • 10-yr: +2 bps to 4.30%
  • 30-yr: +4 bps to 4.88%