Treasuries Rise, Erasing Weekly Loss, on Signs of Economic Slowdown
Treasuries saw an uptick on Friday, putting them on track for a slight weekly gain after new data indicated that the U.S. economy might be cooling. Yields dropped by at least two basis points, with short-term yields seeing a nearly four-basis-point decline. This shift followed a surprising dip in S&P Global’s services activity measure and a downward revision to the University of Michigan’s sentiment gauge for January.
The bond market responded positively, reinforcing expectations that the Federal Reserve may lower interest rates later this year. Analysts predict at least one rate cut as early as June after three consecutive reductions in previous meetings.
The rally comes amid a lack of immediate tariff action by President Trump, which also added to the market's optimism. Experts, like Christian Hoffmann from Thornburg Investment Management, caution that political factors will continue to influence market volatility. The data sets the stage for the Federal Reserve’s upcoming meeting, with economists expecting them to hold the current interest rate range at 4.25%-4.5%.
With further interest rate cuts anticipated, Treasury yields have been on a rollercoaster, reflecting economic and political uncertainties, particularly around trade issues and inflationary fears. Despite recent volatility, the outlook appears somewhat brighter as the market digests the latest economic signals.
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