Core Viewpoint - Investors are increasingly optimistic about US Treasuries as expectations grow for the Federal Reserve to cut interest rates in September due to recent softer economic data [1][3]. Group 1: Market Reactions - A significant increase in open interest was observed, with 70,000 contracts added in October fed funds futures, marking the largest daily increase for that month following a disappointing employment report [2]. - The US 10-year Treasury yields have decreased from a peak in July to their lowest levels in five months, indicating a rally in bonds as economic cooling is suggested by recent reports [4]. - The yield on two-year notes, sensitive to rate changes, fell by 2 basis points to 3.54% [5]. Group 2: Economic Indicators - Nonfarm payrolls increased by only 22,000 in August, and unemployment rose to its highest level since 2021, reinforcing the view of a cooling economy [4]. - A report from the Bureau of Labor Statistics indicated that the number of workers on payrolls through March may be revised down by a record 911,000, further impacting market sentiment [5]. Group 3: Forecast Adjustments - Wall Street analysts are revising their forecasts to anticipate a more aggressive rate cut trajectory, with Barclays now predicting a quarter-point cut at each of the remaining meetings this year [6]. - Interest rate swaps currently reflect expectations for a full 25 basis point cut at the next Federal Reserve meeting, although some market participants are speculating on a larger cut due to weak economic data [6].