U.S. Treasury yields fell on Friday, with the 2-year Treasury yield sliding below 4.6% as investors considered when the Federal Reserve will begin interest rate cuts.
The 2-year Treasury yield was last lower by more than 3 basis points at 4.596%, pulling back after hitting 4.74% at one point during Monday’s session. The yield on the 10-year Treasury was down by more than 6 basis points to 4.206%.
“We seeing yields move lower as the Fed has kind of recommitted to rate cuts this year, which has also added to the positive sentiment in both bond and stock markets,” said Mona Mahajan, senior investment strategist at Edward Jones.
An ongoing move in this direction as the Fed nears cuts could present an opportunity for investors, she added.
Yields and prices have an inverted relationship and one basis point is equivalent to 0.01%.
The central bank left rates unchanged at the conclusion of its policy meeting this week, but pointed to likely rate cuts ahead. Policymakers indicated that they are expecting three rate cuts to take place this year, which was in line with previous central bank estimates.
Investors were concerned that the Fed may cut this number as recent economic data indicated that inflation may be more persistent than previously expected.
The Fed did not, however, provide any more clarity about a potential timeline for rate cuts. Traders were last pricing in an 88% chance that the central bank will leave rates unchanged at its next meeting on April 30-May 1, but a roughly 67% likelihood of a June rate cut according to CME’s FedWatch tool.
The Fed reiterated that economic data would be a key marker for when rates will ease and said that its estimates were based on the economy developing “broadly as expected.”
Next week’s economic data releases include the Fed’s preferred inflation gauge known as the personal consumption expenditures price index.
