Quick overview

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US Treasuries surged as economic data releases confirmed speculation that the Federal Reserve will lower interest rates at least twice this year, setting them up for a third week of gains. Most tenors fell to their lowest level in over a month as a result of the move, which pushed yields down across maturities.

The Bloomberg Treasuries index has yielded a weekly return of roughly 0.6 percent.

 Andrew Brenner, head of international fixed income at NatAlliance Securities, stated, “We’re going to keep rock and roll.”  In terms of lower yields. Markets are worried that the unemployment rate will be much lower in a week.

There may be a reallocation from stocks to bonds during Monday’s month-end. Ahead of the Fed’s meeting later this month, traders are focusing on the jobs report. In addition to wagering on a third quarter, they are already fully pricing in two cuts by year-end, beginning in September.

U.S. personal spending growth rate for the first quarter, which was part of a revision to America’s first-quarter gross domestic product, changed from 1.2 percent to 0.5 percent on Thursday. Other economic indicators revealed surprising strength, such as lower-than-expected initial jobless claims. Short-dated bonds, which are more sensitive to the Fed’s policy outlook, saw the biggest gains after the release.

 Two-year yields had dropped seven basis points to 3.71 percent by the end of the day. For the first time since 2021, the widely followed spread between the five- and 30-year notes rose to over 101 basis points, and a $44 billion auction of seven-year notes was warmly received. Fed rate cut expectations are typically linked to a steepening yield curve. Some bonds were already rising in response to a Wall Street Journal report suggesting President Donald Trump would soon appoint Jerome Powell’s successor.