FX.co ★ US 10-Year Yield Extends Downturn

The yield on the U.S. 10-year Treasury note dipped below 4.04% on Tuesday, nearing levels last seen in April. This decline followed remarks by Federal Reserve Chair Powell, indicating a weakening labor market. These comments strengthened expectations for an upcoming interest rate cut, alleviating discount-rate pressures on bonds. Additionally, investors continued to consider the implications of ongoing trade tensions between the U.S. and China. This includes China's imposition of sanctions on U.S.-affiliated divisions of South Korea's Hanwha Ocean, as well as the potential for a meeting between President Trump and Xi Jinping, which could offer an opportunity to de-escalate the situation. Meanwhile, the partial shutdown of the U.S. federal government has constrained the release of critical economic data. This lack of information has reduced immediate insight into domestic economic growth, thus keeping yields low as markets recalibrate their short-term policy expectations.