That’s an indication investors see the Fed potentially reducing rates faster and deeper than previously anticipated. Swaps traders still price in more than two quarter-point cuts this year, with the first move likely in September.
The US yield curve steepened sharply amid growing calls for the Federal Reserve to start cutting interest rates as soon as next week.
Yields on policy-sensitive two-year Treasuries slid three basis points on Wednesday, while those on 10-year bonds were up by about the same amount. That pushed the differential between those yields to about 14 basis points, the smallest margin since October 2023.
