Treasury Market Soars as Employment Data Signals Rate Cuts Ahead

The Treasury market has accelerated as softening US employment data has fueled speculation that the Federal Reserve will start aggressively cutting interest rates to keep the economy from stalling. The yield on the policy-sensitive two-year Treasury fell to 3.84%, the lowest level since May 2023, by as much as 31 basis points. The market is now pricing in expectations that the US central bank will cut its benchmark rate by more than a full percentage point by the end of the year. With just three meetings left, it reflects the growing perception that the Fed will need to make an unusually large half-point move at one of the gatherings or act between its scheduled meetings to bolster growth.