The 10-year Treasury yield was relatively flat on Monday as investors prepare for this week’s Federal Reserve meeting, where policymakers are widely expected to cut interest rates by a quarter of a percentage point.
The benchmark 10-year Treasury yield was little changed at 3.991%, while the 2-year Treasury yield rose more than 1 basis point to 3.501%. The yield on the 30-year Treasury note fell more than 2 basis points to 4.562%.
One basis point equals 0.01% (1/100 of 1%), and yield and price are inversely proportional to each other.
The Fed’s interest rate decision on Wednesday was the key event of the week, with investors hoping policymakers will cut rates, especially after the Bureau of Labor Statistics released lower-than-expected September inflation data last week.
Interest rate futures trading indicates a near-universal view that the benchmark overnight federal funds rate will fall to a range of 3.75-4.00% by the end of the session from its current range of 4.00-4.25%, according to the CME FedWatch tool.
“Given the lack of data and the FOMC’s remaining divided views, U.S. economists believe Chairman Jerome is unlikely to issue a clear signal about future policy direction, focusing on topics such as balance sheet policy and financial stability,” Deutsche Bank analysts said in a note.
Beyond monetary policy, bond investors are watching trends in global trade for clues about the future health of the global economy. President Donald Trump and Chinese President Xi Jinping are scheduled to meet in South Korea on Thursday in hopes of easing trade tensions between the world’s two largest economies.
Treasury Secretary Scott Bessent recently reassured investors that U.S.-China talks have been “constructive, wide-ranging (and) deep.”
“A phantom trade deal and a dovish Fed could add fuel to the fires of market speculation right now, but inflation is accelerating again and the full effects of tariffs and trade wars are yet to be felt,” said Dean Smith, chief strategist at FolioBeyond.
