FX.co ★ Treasury Yields Edge Down

The yield on the US 10-year Treasury note decreased by nearly 2 basis points to 4.22% on Monday, driven by a general risk-aversion sentiment and a shift away from riskier investments. This development occurs as traders readjust expectations for monetary policy under the prospective leadership of Kevin Warsh at the Federal Reserve. President Donald Trump nominated Kevin Warsh as the prospective Fed chair last Friday, a decision perceived by markets as more hawkish. Warsh is regarded as a proponent of lower interest rates, albeit not as aggressively as some other candidates. He is also anticipated to reduce the Fed's balance sheet, which could potentially lessen liquidity in the financial system. Despite the Federal Open Market Committee (FOMC) being divided on the pace and extent of further policy easing, markets continue to anticipate two Fed rate cuts this year with Warsh at the helm. Concurrently, House and Senate leaders have reached a consensus on a spending agreement to prevent a government shutdown, although it still awaits approval from the House, which could occur as early as today.