US Treasury Yields Fall as Markets Maintain Rate Cut Bets

Highlights:

• Treasury yields dropped up to seven basis points following mixed economic data.
• Two-year yield fell to 3.95%, while 10-year dropped to 4.39% at the time of writing.
• Markets are pricing in the first US Fed rate cut for October 2025.

Economic Signals Reinforce 2025 Rate Cut Expectations

US Treasury yields declined on Tuesday as traders remained confident the US Federal Reserve will initiate at least one interest rate cut in 2025. Mixed retail sales data for May and a successful auction of inflation-protected securities contributed to a modest bond rally, which was further supported by investor caution amid geopolitical tensions in the Middle East. At the time of writing, bond yields across the curve fell between two and nearly seven basis points. The two-year Treasury yield — typically sensitive to short-term Fed policy changes — eased by two basis points to 3.95%, while the benchmark 10-year yield declined six basis points to 4.39%.

Geopolitical Risk Adds to Bond Market Strength
Risk-averse sentiment intensified in the latter part of the US trading session, as investors reacted to the potential for escalating conflict in the Middle East. US equities retreated in tandem, with some investors seeking safety in government bonds, further pushing yields lower. The market remains focused on the Federal Reserve’s two-day policy meeting underway in Washington. While rates are widely expected to stay unchanged for both June and July, investors will be closely watching for signals in the Fed’s updated economic projections, due Wednesday.

October Rate Cut Priced In

Futures pricing shows that markets are still betting on nearly two quarter-point cuts by the end of 2025, with the first fully priced in for October. This outlook hinges on inflation trends, labour market data, and global economic conditions remaining aligned with expectations.

Disclaimer for Kapitales Research

The materials provided by Kapitales Research, including articles, news, data, reports, opinions, images, charts, and videos ("Content"), are intended for personal, non-commercial use only. The primary goal of this Content is to educate and inform readers. This Content is not meant to offer financial advice, nor does it include any recommendation or opinion that should be relied upon for making financial decisions. Certain Content on this platform may be sponsored or unsponsored, but it does not serve as a solicitation or endorsement to buy, sell, or hold any securities, nor does it encourage any specific investment activities. Kapitales Research is not authorized to provide investment advice, and we strongly advise users to seek guidance from a qualified financial professional, such as a financial advisor or stockbroker, before making any investment choices. Kapitales Research disclaims all liability for any direct, indirect, incidental, or consequential damages arising from the use of the Content, which is provided without any warranties. The opinions expressed by contributors or guests are their own and do not necessarily reflect the views of Kapitales Research. Media such as images or music used on this platform are either owned by Kapitales Research, sourced through paid subscriptions, or believed to be in the public domain. We have made reasonable efforts to credit sources where appropriate. Kapitales Research does not claim ownership of any third-party media unless explicitly stated otherwise.

Customer Notice:

Nextgen Global Services Pty Ltd trading as Kapitales Research (ABN 89 652 632 561) is a Corporate Authorised Representative (CAR No. 1293674) of Enva Australia Pty Ltd (AFSL 424494). The information contained in this website is general information only. Any advice is general advice only. No consideration has been given or will be given to the individual investment objectives, financial situation or needs of any particular person. The decision to invest or trade and the method selected is a personal decision and involves an inherent level of risk, and you must undertake your own investigations and obtain your own advice regarding the suitability of this product for your circumstances. Please be aware that all trading activity is subject to both profit & loss and may not be suitable for you. The past performance of this product is not and should not be taken as an indication of future performance.

Kapitales Research, Level 13, Suite 1A, 465 Victoria Ave, Chatswood, NSW 2067, Australia | 1800 005 780 | info@kapitales.com