Bond Market Update

Powell Speech Boosts Rate Cut Odds

• U.S. Treasuries have rallied to highs in reaction to Fed Chairman Powell's speech at the Jackson Hole Symposium, during which he said that the shifting balance of risks may warrant an adjustment to policy. This view has allayed fears that Mr. Powell will maintain a hawkish tone, resulting in continued pressure on rate cut expectations. The implied likelihood of a 25-basis point cut on September 17 has returned to 91.3% from 75.0% yesterday. The early rally has sent yields across the curve to levels from a week ago while equities have shown early strength with the S&P 500 (+1.4%) reclaiming its loss from earlier this week.
• Yield Check:
  • 2-yr: -8 bps to 3.71%
  • 3-yr: -8 bps to 3.66%
  • 5-yr: -8 bps to 3.78%
  • 10-yr: -7 bps to 4.26%
  • 30-yr: -5 bps to 4.88%