Treasury Yields Hover Near 4-month Highs as Attention Turns to the Fed

Early Thursday, bond prices showed slight improvement, but the 10-year Treasury yield continued to hover near its highest point since early July, fueled by speculation that another Trump administration could stimulate economic growth and reintroduce inflationary pressures.

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Current Bond Market Activity

As of Thursday morning, the yield on the 2-year Treasury note decreased by 3.9 basis points to 4.239%, reflecting the inverse relationship between yields and prices. Meanwhile, the 10-year Treasury yield dipped 2 basis points, settling at 4.415%. The yield on the 30-year Treasury was nearly unchanged, holding steady around 4.602%.

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Factors Impacting the Market

Treasury yields surged after Donald Trump’s recent election victory, but the market is now shifting its focus back toward monetary policy. Investors are heavily anticipating the Federal Reserve's next move, with a 97.4% chance priced in for a 25-basis-point rate cut, lowering the target range from 4.75%–5.00%.

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The Fed’s announcement is expected at 2 p.m. Eastern, followed by a press conference at 2:30 p.m. where Fed Chair Jerome Powell will offer additional insights. Traders are particularly interested in whether Powell and the Fed's policy outlook might shift in response to Trump’s victory and potential economic policies.

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Given Trump’s win, market analysts are adjusting their expectations for future rate cuts. Derren Nathan, head of equity research at Hargreaves Lansdown, noted that market projections now include only two more rate cuts in 2025, a reaction to potential tariff increases and tax cuts expected from a Trump administration. Such policies could drive inflation, impacting the Fed’s path on rates.

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Other Key Developments

The Bank of England (BoE) is also anticipated to announce a 25-basis-point reduction to its bank rate, bringing it down to 4.75%. This decision will be revealed at noon U.K. time, or 7:00 a.m. Eastern, and could affect U.S. markets as investors analyze the global monetary landscape.

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Several other economic reports and indicators are expected on Thursday, which may add more context for traders as they evaluate market trends and conditions:

• 8:30 a.m. Eastern – U.S. weekly initial jobless claims, providing an update on the labor market.
• 10:00 a.m. Eastern – U.S. wholesale inventories for September, offering insight into supply chain and inventory levels.
• 1:00 p.m. Eastern – The Atlanta Fed's GDPNow forecast for Q4, giving an early estimate of economic growth.
• 3:00 p.m. Eastern – September’s U.S. consumer credit report, an indicator of consumer borrowing behavior.

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Each of these updates could further shape investor sentiment and the Treasury market’s direction as the day unfolds.

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