FX.co ★ US 10-Year Yield Rebounds

The yield on the 10-year US Treasury note edged upward towards the 4.5% threshold on Wednesday, reversing four previous sessions of decline as the markets evaluated the Federal Reserve's policy direction and fiscal risks associated with the Treasury. Insights from the Federal Open Market Committee's (FOMC) May meeting indicated that members collectively decided to postpone major policy shifts until economic uncertainties diminished, despite recognizing continued strength in both economic growth and the labor market. Despite this, rate futures suggest a loose consensus for implementing two 25 basis point rate cuts this year, anticipated for September and December. Concurrently, downward pressure on US Treasuries came in part from significant declines in Japanese Government Bonds (JGBs). Notably, Japan's recent 40-year bond auction faced its weakest demand in 10 months, signaling a lukewarm investor response to the Ministry of Finance's commitment to reducing issuance. Additionally, Treasuries faced domestic fiscal pressures after the House passed legislation poised to substantially widen the budget deficit, a move coming on the heels of Moody's decision to downgrade US credit over concerns about its unsustainable debt path.