The yield on the 10-year Treasury was relatively unchanged on Monday as investors looked ahead to the Federal Reserve’s meeting this week where policymakers are widely expected to cut interest rates a quarter percentage point.
The benchmark 10-year Treasury yield was little changed at 3.991%, while the 2-year Treasury note yield was more than 1 basis point higher at 3.501%. The 30-year bond yield fell more than 2 basis points to 4.562%.
One basis point equals 0.01% (1/100th of 1%) and yields and prices move inversely to one another.
The Fed’s interest rate decision on Wednesday will be the key event this week and investors are anticipating that policymakers will cut interest rates, especially after the Bureau of Labor Statistics released cooler-than-expected September inflation data last week.
Interest rate futures trading signals a near universal belief that the benchmark overnight fed funds rate will fall to a range of 3.75% to 4.00% at the end of the meeting, down from a range of 4.00 to 4.25% today, according to the CME FedWatch Tool.
“With a dearth of data and a still-divided FOMC, our U.S. economists think Chair [Jerome] Powell is unlikely to provide clear signals on the policy path ahead, focusing more on topics including balance sheet policy and financial stability,” Deutsche Bank analysts said in a note.
Beyond monetary policy, fixed income investors are looking at developments in global trade for clues into the future health of the global economy. President Donald Trump and China President Xi Jinping are set to meet in South Korea on Thursday in hopes of reducing trade tensions between the world’s two largest economies.
Treasury Secretary Scott Bessent recently reassured investors this weekend, noting U.S.-China talks have been “constructive, far-reaching [and] in-depth.”
“Phantom trade deals, and a dovish Fed may add more fuel to the speculative fire in markets right now, but inflation is re-accelerating and the full impact of the tariffs and trade wars are yet to be felt,” said Dean Smith, chief strategist at FolioBeyond.
