FX.co ★ US 10-Year Yield Extends Rebound

The yield on the US 10-year Treasury note climbed towards 4.2% on Thursday, continuing its recovery from the five-month low of 4% recorded last week. This movement was prompted by strong economic indicators which lessened the immediate need for further interest rate cuts by the Federal Reserve. The United States GDP was adjusted upward, displaying an annualized growth of 3.8% in the second quarter, while orders for durable goods significantly surpassed market expectations. Furthermore, initial unemployment claims decreased for the second consecutive week, reaching their lowest level in two months and counteracting earlier fears of a rapid decline in the labor market—concerns that previously led FOMC members to advocate for additional rate reductions. Rate futures continue to suggest that investors overwhelmingly anticipate a 25 basis points rate cut from the Fed in the coming month, though over a third of the market is preparing for the possibility of a rate hold in December. Diminished expectations for Fed rate cuts caused yields on shorter-term notes to increase more than those on longer-term bonds, thereby reducing the degree of yield steepening observed this quarter.