Global Bond Rally Accelerates as Market Bets on Big Rate Cuts
- Swaps imply at least five quarter-point cuts by Fed this year
- Dovish repricing follows weaker-than-expected US jobs data
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Global bonds rallied as traders bet the Federal Reserve and fellow central banks will turn more aggressive in cutting interest rates amid mounting signs that economic growth is faltering more quickly than expected just weeks ago.
Short-dated debt — the most sensitive to changes in monetary policy — led the move, with the US two-year Treasury yield falling as much as 23 basis points Monday to 3.65%, the lowest in over a year. The two-year yield dipped below the 10-year for the first time since July 2022, when Fed interest-rate increases drove short-term yields higher. In Europe, equivalent German yields tumbled by a similar amount to 2.15%.