Investors analyze U.S. Treasury yields amidst economic data scrutiny

Treasury yields have seen a significant shift in recent days, with the 10-year yield increasing by over 3 basis points to its highest level since November. This comes after news that manufacturing in the U.S. expanded for the first time in 17 months, as reported by the Institute for Supply Management’s ISM manufacturing index. The index rose to 50.3 from February’s reading of 47.8, surpassing the Dow Jones consensus estimate of 48.1 and indicating growth as it measures the percentage of companies reporting expansion against contraction.

Despite this positive news, market odds for a June rate cut have decreased to around 58.8% from about 70% a week ago, as investors are now more cautious about future rate cuts following the unexpected return of manufacturing growth in the U.S. Dutch bank ING noted that markets interpreted this growth as reducing the likelihood of significant Fed rate cuts, citing it as one factor behind their decision to adjust their interest rate forecasts downwards slightly.

Meanwhile, the benchmark overnight borrowing rate remains unchanged at a range of 5.25%-5.5%, and investors are now pricing in three quarter-percentage point cuts by the end of the year, with a slight inclination towards a June start date depending on how economic data unfolds.

In summary, while Treasury yields have increased following recent news about U.S manufacturing growth and interest rates remain unchanged for now, investors are becoming increasingly cautious about future rate cuts and adjusting their interest rate forecasts accordingly.

Investors should keep an eye on economic data coming up next month when they expect more quarter-percentage point cuts by

By Sophia Gonzalez

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