Treasury yields rise: market bets on Fed rate cut

Investors are eyeing a potential interest rate cut at the December meeting, while economic data drives expectations.

U.S. Treasury yields rose on Monday, marking the start of the month with higher long-term yields, as investors increased bets on a possible interest rate cut by the Federal Reserve.

At 5:47 a.m. ET, the 10-year Treasury yield rose over 2 basis points to 4.044%, while the 30-year yield climbed 3 basis points to 4.702%. The 2-year bond saw a marginal increase of less than 1 basis point, reaching 3.497%. Recall that one basis point equals 0.01%, and yields move inversely to prices.

According to the CME FedWatch Tool, traders are pricing in nearly an 88% probability of a 25-basis-point rate cut, up from 85% recorded last Friday. A rate cut would likely lead to higher bond prices.

This week will be crucial for investors: on Monday, the ISM Manufacturing PMI will be released; Wednesday will bring the ADP Employment Report and the ISM Services PMI; Thursday will see weekly jobless claims data; and the week will close on Friday with the September Personal Consumption Expenditures (PCE) Price Index.

With Fed officials remaining silent ahead of the December 9/10 meeting, economic data remains the main indicator for gauging the next move on rates.

Andrea Pelucchi