U.S. Treasury bond yields fell sharply on Monday due to expectations of significant interest rate reductions by the Federal Reserve.
This shift came in response to disappointing employment figures that raised concerns about a potential economic downturn in the United States.
The yield on the two-year U.S. Treasury bond, which reacts strongly to Federal Reserve interest rate forecasts, fell to 3.691% during European trading, marking its
lowest level since May of the previous year. As of the latest update, it had decreased by 10 basis points to 3.77%.
Last week, the yield, which moves in the opposite direction to the price, dropped by 53 basis points.
Investors are contending with a significant surge in the Japanese yen, causing turmoil in the country's markets. This development contributed to a sharp
decline of 12.4% in the Nikkei 225 stock index on Monday, marking its largest single-day plunge since 1987. Meanwhile, U.S. S&P 500 futures were showing a 2.7% decline as well.
We continue to believe that a gentle economic slowdown remains the predominant scenario we anticipate.
According to pricing in derivative markets, traders now consider a 50 basis point interest rate cut in September as highly likely.