Treasuries Edge Up as Investors Brace for US Payrolls Report

Group 1 - The two-year Treasury yield decreased to 3.49%, marking a third consecutive day of decline, while the 10-year yield remained stable at 4.17%, resulting in the widest spread between the two since early 2022, indicating concerns about potential inflation from aggressive rate cuts [3]. - Investors are anticipating a 20% chance of a 25 basis-point rate reduction by the Federal Reserve at its next meeting in January, following a recent cut [4]. - Short-dated yields have been declining as markets perceive the Fed's rate outlook as less hawkish than previously expected, with traders predicting at least two additional quarter-point cuts in 2026 to bolster the economy, while Fed officials project a median forecast of one cut [5]. Group 2 - The upcoming jobs data is crucial, as it could significantly influence market expectations regarding the Fed's decision to maintain rates at the next FOMC meeting in January [2]. - Investors are also closely monitoring consumer price figures due later in the week for further insights into the Fed's rate-cutting trajectory [6]. - Currency markets are adjusting to the potential for economic slowdown, with bearish sentiment on the dollar reaching a three-month high in the options market [7].