(Bloomberg) — U.S. Treasuries rose on Tuesday as investors bet the Federal Reserve would cut interest rates at least twice this year and as jitters over global technology stocks boosted demand for safer assets.
As the U.S. bond market reopened after the holidays, the benchmark 10-year Treasury yield fell 3 basis points to 4.02%, the lowest level in nearly three months, while the two-year Treasury note was approaching a new 2022 low.
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The moves come after a strong end to last week, when bets grew that slowing inflation would prompt rate cuts and pushed U.S. Treasuries to their biggest weekly gain in months.
Prashant Newnaha, senior strategist at TD Securities in Singapore, said last week’s weak U.S. inflation data and deleveraging of equities by quant funds were driving bond buying.
“Technically, 4% on the U.S. 10-year Treasury note is a make-or-break level. If that level is breached, expect a sharp rebound,” he said.
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Traders this week are watching further data on the U.S. job market and minutes from the Federal Reserve’s January meeting for a better idea of ​​the timing of a rate cut.
The latest data on the health of the economy will be released at 8:15 ET, including ADP private employment data. Investors will be watching for any signs of overheating in the job market, which could undermine market bullish rate cut expectations, which are currently pricing in a 63 basis point cut in 2026.
Kamakshya Trivedi, chief currency strategist at Goldman Sachs Group Inc., told Bloomberg TV: “We think the labor market overall remains on a soft trend, but recent data has been quite encouraging.”
While Trivedi expects U.S. inflation to remain benign, others remain concerned about price pressures. Benoit Anne, managing director of MFS Investment Management, said the U.S. economy looks strong, but that increases the risk of overheating.
Anne said if upcoming data showed this was happening, current rate pricing was likely to loosen, triggering a potential “significant correction” in the market.
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