Investors analyze U.S. Treasury yields amidst economic data scrutiny

On Tuesday, the 10-year Treasury note yield increased, continuing its upward trend from the previous session. Traders reconsidered the possibility of the Federal Reserve cutting rates in June as they observed a slight decrease in market odds for such a move. The benchmark rate rose more than 3 basis points to 4.361%, reaching its highest level since November 28 and briefly breaking above 4.4%. In contrast, the 2-year Treasury note yield decreased nearly 3 basis points to 4.691%.

Yields and prices move in opposite directions, with one basis point equaling 0.01%. This recent movement in Treasury yields was driven by news that manufacturing in the U.S. expanded for the first time in 17 months. The Institute for Supply Management reported that the ISM manufacturing index rose to 50.3, up from 47.8 in February and surpassing the Dow Jones consensus estimate of 48.1. A reading above 50 indicates growth as it measures the percentage of companies reporting expansion against contraction.

The return of manufacturing growth has led investors to become more cautious about future rate cuts by the Federal Reserve, which had been anticipated after last month’s decision to leave interest rates unchanged for the fifth consecutive time without any major changes to their expectations of three quarter-percentage point cuts by year’s end. Dutch bank ING noted that markets interpreted this growth as reducing the likelihood of significant Fed rate cuts, indicating that market pricing currently anticipates three rate cuts with a slight inclination towards a June start date depending on how economic data unfolds.

Overall, this recent movement in Treasury yields is an indication that investors are becoming more cautious about future rate cuts by the Federal Reserve following unexpected returns of manufacturing growth in

By Riley Johnson

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