Bond Rally Stalls as Rising Risk Appetite Dulls Haven Demand

Market Overview - Treasuries and the dollar have retreated as demand for haven assets decreased, with a renewed risk appetite lifting technology stocks higher [1] - Yields on five-year notes increased by almost 2 basis points to 3.61%, while yields on the 10-year rose less than 1 basis point to about 4.04% [1] - The greenback fell for the first time this week as investors pushed the tech-heavy Nasdaq 100 higher [1] Auction Results - The sale of $70 billion of five-year notes was awarded at 3.615%, slightly higher than the 3.608% level before the auction [2] - Primary dealers absorbed 12.8% of the sales, the highest since March 2025, indicating less demand from investors [2] Investor Sentiment - Analysts suggest that the recent rally in five-year levels may have made them too rich to attract strong investor demand [3] - There are indications of a potential pullback in foreign demand and demand from investment funds this month [3] Federal Reserve Outlook - Traders are betting that the Fed will maintain steady rates until at least the end of Chair Jerome Powell's term in May, with a 50% probability of a quarter-point cut by June [5] - The market has fully priced in roughly two cuts by December, while the expectation of a third reduction has diminished [5] - Some Fed officials have cautioned against near-term policy easing, citing improvements in the labor market and persistent inflation risks [6]