Treasurys

Traders are now betting that may be enough for the Federal Reserve to start cutting interest rates as soon as September.

The move was led by the two-year yield, which at one point fell nearly 8 basis points below 4.69% — short of last week's low 4.65%.

The $39 billion 10-year note sale was awarded at 4.438%, compared with a yield of 4.458% in pre-auction trading at 1 p.m. New York time, the bidding deadline.

Treasury yields surged across the curve on Friday, while traders — as well as economists at JPMorgan Chase & Co. and Citigroup Inc. — pushed out their expectations for the Fed's first rate reduction.

The recalibration came amid the best two-day rally for short-end Treasuries since January, following the central bank's latest policy meeting on Wednesday.

Traders have built positions in options linked to the Secured Overnight Financing Rate targeting a scenario where officials keep rates steady past December's policy meeting.

Traders are no longer fully pricing in a rate cut before November, while at the start of the year, cuts beginning in March were fully priced in.

Global yields rose on Thursday as markets around the world adjusted to central banks keeping interest rates higher for longer, with the US two-year yield briefly exceeding 5% for the first time since November.

Traders ceased fully pricing in a Fed rate cut before September after the March employment report revealed that US payrolls expanded by the most in nearly a year.

Treasuries fell across the curve after data showed manufacturing unexpectedly expanded for the first time since September 2022 — while input costs climbed.