U.S. Treasury bonds surged significantly on Friday, with 2- to 5-year bonds leading the rally, as traders reprice interest rate prospects and fully incorporate expectations of two rate cuts by the Federal Reserve this year. Previously, Federal Reserve Chairman Jerome Powell, in a speech at the annual Jackson Hole meeting, indicated an openness to a rate cut in September, given the weakening labor market since the last policy meeting in July.
Around 3:00 PM New York time, short-term yields fell by more than 10 basis points, and long-term yields dropped by at least 3 basis points, with the 10-year yield declining by 7 basis points to 4.26%, approaching the day’s low.
The yield curve steepened noticeably, with the 5-year to 30-year spread breaking above 112 basis points for the first time since 2021.
Yields remain within the range established since August 1, when weaker-than-expected employment data reignited expectations for at least two…
