Key Takeaways

Treasury yields declined as markets waited to see how clearly the Federal Reserve, which concludes its July policy meeting this afternoon, would signal its next move on interest rates.

The yield on the 10-year note , which reflects investors’ expectations for long-term interest rates, dipped below 4.1% for the first time since March before rebounding slightly on Wednesday morning.

Treasury yields have declined precipitously in the last week as investors have ramped up bets that the Fed will begin a long-awaited rate cut campaign in September.

Economic data in recent weeks have painted a picture of a cooling, but not ailing, economy. Hiring slowed and inflation declined in June, but the U.S. economy grew faster in the second quarter than it did in the first.

The latest data has helped convince many on Wall Street that the U.S. economy is indeed on track to achieve the elusive soft landing. Traders, in turn, are predicting the Fed will soon unwind its most aggressive rate hike campaign in decades. Federal funds rate futures trading data implies markets see an interest rate cut by September as certain.

Wall Street seems to expect the Fed’s rate cuts to be nearly as aggressive as their hikes. Data suggests traders are forecasting the Fed will slash interest rates by 1.75 percentage points between now and September 2025.

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