Investors evaluate economic data with U.S. Treasury yields in focus

Fed Rate Cut Possibility Rises as U.S. Manufacturing Growth Surprises Market Investors

On Tuesday, the 10-year Treasury note yield saw an increase, building on gains from the previous session. Traders were reevaluating the possibility of the Federal Reserve cutting rates in June. The benchmark rate rose almost 7 basis points to 4.397%, reaching its highest level since November 28. Yields and prices move in opposite directions, with one basis point equaling 0.01%.

Following data released by the Institute for Supply Management on Monday showing that manufacturing in the U.S. expanded for the first time in 17 months, market pricing currently anticipates three rate cuts with a possible start in June. Any number above 50 indicates growth, which was seen as a positive sign by investors who had been cautious about significant Fed rate cuts moving forward due to an unexpected uptick in U.S. manufacturing growth.

Based on fed futures trading, the likelihood of a rate cut in June has decreased to around 58.8%, compared to about 70% a week prior, as market analysis suggests that the Fed is taking a conservative approach and waiting for further data before making any decisions about interest rates. The Federal Reserve decided to maintain interest rates for the fifth consecutive time last month, keeping the overnight borrowing rate steady in a range of 5.25%-5.5%.

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