Treasuries continued their upward trend on Monday, building on the momentum from last Friday's session rebound.
Bond prices saw a steady increase during the morning hours but plateaued into the afternoon. Consequently, the yield on the benchmark ten-year note, which inversely correlates with its price, declined by 2.5 basis points to 3.867 percent.
The strength in treasuries was driven by traders' optimism regarding future interest rate trends, influenced by recent data indicating a slowdown in inflation rates.
According to the CME Group's FedWatch Tool, there is a 75.5 percent probability of a quarter-point rate cut next month, with a 24.5 percent chance of a half-point cut.
This week's release of the Federal Reserve's latest monetary policy meeting minutes, along with remarks from Fed Chair Jerome Powell and other officials at the Jackson Hole Economic Symposium, may provide further insights into interest rate projections.
"September is anticipated as the month for the Fed’s first rate cut, following inflation's drop below 3%," commented Danni Hewson, AJ Bell's head of financial analysis. "Investors are now speculating on the extent of the cut and whether it could be the only reduction this year."
She added, "Concerns that the Fed had been too slow have eased somewhat, but every word at this week's Jackson Hole Symposium will still be closely analyzed."
In other U.S. economic news, the Conference Board reported a significant decline in its leading economic indicators for July. The leading economic index decreased by 0.6 percent in July, following a 0.2 percent dip in June. Economists had predicted a 0.3 percent decline.
Additionally, the index fell by 2.1 percent over the six months ending July 2024, an improved figure compared to the 3.1 percent drop over the six months from July 2023 to January 2024.
"The LEI continues its monthly decline; however, the six-month annual growth rate no longer signals a forthcoming recession," noted Justyna Zabinska-La Monica, Senior Manager of Business Cycle Indicators at The Conference Board.
With a lack of major U.S. economic data expected on Tuesday, trading might be volatile as investors await the Fed minutes and the Jackson Hole Symposium.
