With Fed Rate Announcement Scheduled For Wednesday, Here’s How US Treasury Yields Are Behaving

According to data from the CME FedWatch tool, there is an 87.4% probability of a 25 basis point rate cut this week.

Ahead of the Federal Reserve’s December rate announcement scheduled for Wednesday, U.S. Treasury yields were holding steady on Monday morning.

At the time of writing, the 10-year, 30-year, and 2-year Treasury yields were up by a basis point each. While the 10-year Treasury yield hovered at 4.15%, the 30-year yield was 4.8%, and the 2-year yield was 3.57%.

The 30-year Treasury yield has now risen to a three-month high. Treasury prices and yields are inversely related – a rise in prices is accompanied by a fall in yields, and vice versa.

What Are Fed Rate Cut Chances?

According to data from the CME FedWatch tool, there is a 87.4% probability of a 25-basis-point rate cut this week.

“The Fed doesn't tend to go against market odds when they're that extreme in one direction or another,” said Liz Ann Sonders, chief investment strategist, Schwab Center for Financial Research (SCFR), referring to odds of a cut this week.

However, she added that it would not be a surprise if the Fed’s commentary on the cut took a hawkish tone, similar to the October FOMC meeting, when Fed Chair Jerome Powell shot down expectations of further rate cuts.

This comes amid signs of a cooling labor market. According to data released by payroll processing firm ADP last week, U.S. companies unexpectedly cut 32,000 jobs in November amid an uncertain macroeconomic environment.

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