Treasury yields were lower on Tuesday after strong manufacturing data appeared to reduce the likelihood of an interest rate cut by the U.S. Federal Reserve in June.
The rate on the 10-year Treasury bond fell by around 1 basis point to 4.315%, while the rate of 2 year ticket was down 2 basis points at 4.693%. Yields and prices move in opposite directions and one basis point equals 0.01%.
This comes shortly after U.S. manufacturing grew for the first time in 17 months. The ISM manufacturing index rose to 50.3, up from 47.8 in February and significantly better than the Dow Jones consensus estimate of 48.1. The index measures the percentage of companies reporting expansion versus contraction, so anything above 50 indicates growth.
Markets interpreted the unexpected return of U.S. manufacturing growth “as reducing the chances of a significant Fed rate cut,” Dutch bank ING said in a research note.
Last month, the US central bank left interest rates unchanged for the fifth consecutive time, in line with expectations, keeping its benchmark overnight borrowing rate within a range of 5.25% to 5.5%. %. The Fed also said at the time that it still expected cuts of three-quarters of a percentage point by the end of the year.
That message fueled a rally in markets in the United States and abroad, with benchmark indexes hitting new record highs since then.
Steven Blitz, chief U.S. economist at TS Lombard, told CNBC’s “Squawk Box Europe” on Thursday that the likelihood of a Fed rate cut or cut this year looks “pretty good.” Blitz said markets would continue to advance even if the Fed decides not to ease policy this year.
“There are about 20 individual speeches from the Federal Reserve this week and the market probably thinks that (Monday’s) results will cause officials to be hesitant to commit to significant policy easing,” James Knightley said. chief international economist at ING, in a note published Monday. .
“Nevertheless, there are also plenty of employment numbers throughout the week, culminating with Friday’s nonfarm payrolls and unemployment rate numbers. It could be a choppy trading week,” he said. he added.
— CNBC’s Jeff Cox contributed to this report.
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