(Bloomberg) -- Treasuries were steady following the biggest rally in three weeks, with investors preparing for the Federal Reserve to start buying $40 billion of bills per month on Friday.
Yields on US 10-year debt were little changed at 4.14%. Two-year peers were also steady after tumbling the most in two months on Wednesday as the Fed lowered interest rates a quarter-point to a range of 3.5% to 3.75%. Chair Jerome Powell downplayed dissenting votes and the central bank announced it would initiate purchases of T-bills to ease short-term funding costs.
"The balance sheet expansion is important," said Mohit Kumar, chief economist and strategist for Europe at Jefferies. "Given that the Treasury is skewing issuance towards T-bills and short end, Fed purchases will be stimulative."
Money markets are now pricing a 50% chance that the US central bank will deliver its first quarter-point cut of 2026 in March, with a total of two reductions seen next year.
The Bureau of Labor Statistics will publish initial jobless claims figures later on Thursday, with economists surveyed by Bloomberg expecting an increase to 220,000 from 191,000 in the period ending Dec. 6. The Treasury will conclude this week's bond offerings with a sale of $22 billion 30-year bonds. Last month's auction of the same securities tailed, fueling a rally in yields.
Elsewhere, euro area and UK bonds were broadly steady. Japanese bonds gained after an auction of 20-year debt had the best demand ratio in more than five years as higher yields lured investors. Australian debt jumped after the economy unexpectedly shed jobs in November, which could allow the central bank to extend an interest-rate pause in the face of sticky inflation.
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