10-year Treasury yield jumps as bets on June rate cuts cool down

The 10-year Treasury note yield jumped Tuesday, adding to its gains from the previous session, as traders reassessed the possibility of the Federal Reserve cutting rates in June.

The benchmark rate was up nearly 7 basis points at 4.395%, trading at the highest in two weeks and almost the highest levels of the year. The 2-year Treasury note yield was up nearly 1 basis point at 4.726%. Yields and prices move in opposite directions, and one basis point equals 0.01%.The moves come after manufacturing in the U.S. expanded for the first time in 17 months, according to data released Monday by the Institute for Supply Management. Therose to 50.3, up from 47.

Odds for a June rate cut based on fed futures trading are now down to about 58.8%, off from about 70% a week ago, as investors remain cautious about the direction of rate cuts moving forward. Markets interpreted the unexpected return of U.S. manufacturing growth "as reducing the chances of meaningful Fed rate cuts," Dutch bank INGfor the fifth consecutive time, in line with expectations, keeping its benchmark overnight borrowing rate in a range of 5.25%-5.5%.

"The Fed is playing things cool. And the data has cooperated with that notion," Gregory Faranello, head of U.S. rates strategy at AmeriVet Securities, wrote in a note Monday. "For now, market pricing is embracing three cuts with a lean toward a June start date. But it's tight depending on how the data unfolds."

Source: Loan Digest (loandigest.net)

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