Treasury Yields Set Three-Week High as Data Clouds Rate-Cut Path

Core Insights - The labor market remains resilient, leading to increased Treasury yields and a shift in expectations regarding Federal Reserve interest rate cuts [1][2][6] Economic Data Impact - Weekly jobless claims were lower than expected, and quarterly economic growth exceeded forecasts, contributing to a rise in short-maturity rates [2][3] - The two-year yield increased by approximately 3 basis points to 3.67%, marking the highest level since early September [2] Market Sentiment - Traders have slightly reduced their expectations for interest rate cuts by the Federal Reserve, moving away from fully pricing in a quarter-point cut in late October [3][6] - Despite the current economic data not supporting further rate cuts, some analysts still anticipate cuts in October and December due to a weakening labor market [4] Treasury Yield Movements - The 10-year note yield rose by 3 basis points to 4.17%, while the 30-year yield was around 4.75%, resulting in a flatter Treasury curve [5] - The yield gap between five and 30 years fell below 1 percentage point for the first time since August 11, indicating market skepticism about the Fed's ability to implement a series of rate cuts [5] Future Rate Expectations - Analysts suggest that without significantly weaker economic data, it is unlikely for 10-year yields to drop below 4% in the near term, with rates expected to fluctuate within the 4% to 4.25% range [7]