Investors scrutinize U.S. Treasury yields amid economic data evaluation

On Tuesday, the 10-year Treasury note yield increased by almost 7 basis points to 4.397%, reaching its highest level in two weeks and nearly matching the peak levels of the year. This rise in yields came after traders reconsidered the possibility of the Federal Reserve cutting rates in June, based on news that manufacturing in the U.S. expanded for the first time in 17 months.

The ISM manufacturing index increased to 50.3, up from 47.8 in February and surpassing the 48.1 Dow Jones consensus estimate, indicating growth with a reading above 50 measuring the percentage of companies reporting expansion versus contraction. However, despite this positive development, yields and prices move in opposite directions with one basis point equivalent to 0.01%.

The odds of a rate cut in June based on fed futures trading fell to around 58.8%, down from about 70% a week earlier, as investors remained cautious about the possibility of rate cuts in the future due to this unexpected growth in U.S manufacturing being seen as reducing the likelihood of significant Fed rate cuts according to Dutch bank ING.

In contrast to this movement, yields on short-term treasury bonds rose by almost one basis point to 4.726%, also signaling caution among investors about future rate cuts due to these developments happening at such a fast pace while still early into the year it is difficult for them to predict what will happen next with interest rates .

By Riley Johnson

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