On Tuesday, the yield on the 10-year Treasury note rose, building on gains from the previous session. Traders revisited the possibility of a June Federal Reserve rate cut as they evaluated the data released by the Institute for Supply Management. The benchmark rate climbed nearly 7 basis points to 4.397%, hitting its highest level in two weeks and near its peak for the year. In contrast, the yield on the two-year Treasury note rose nearly 1 basis point to 4.726%. Yields and prices move in opposite directions, with one basis point equivalent to 0.01%.

The unexpected rise in US manufacturing was seen as reducing the likelihood of a significant rate cut by the Fed. The ISM manufacturing index rose to 50.3 from 47.8 in February and exceeded the Dow Jones consensus estimate of 48.1. A reading above 50 indicates growth, and the index measures the percentage of companies reporting expansion versus contraction. According to Dutch bank ING, this news reduced investors’ expectations about future rate cuts based on Fed futures trading, which fell to around 58.8% down from around 70% a week earlier.

In recent months, market prices have pointed to an expectation of three cuts, with preferences to begin in June pending further data updates according to Gregory Faranello, head of U.S interest rate strategy at AmeriVet Securities. Despite this cautious approach by investors and market predictions about future rate cuts, it is important for traders to remain vigilant as rates can change rapidly based on new information and market conditions.

In summary, while yields continue to rise following recent gains from a week ago, there remains uncertainty about future Federal Reserve interest rate cuts based on new data releases and investor expectations about future changes in borrowing costs.

Meanwhile

By Samantha Johnson

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