U.S. Treasury yields held steady on Tuesday as the Federal Reserve’s Federal Open Market Committee prepared for its monetary policy meeting, at the end of which it is widely expected to announce an interest rate cut.
By 6:22 a.m. ET, the yield on the 10-year Treasury note was down less than 1 basis point at 3.619%, while the yield on the 2-year note was up 1 basis point at 3.567%.
It is worth noting that yields and prices move in opposite directions, with a basis point equal to 0.01%.
All eyes are on the Federal Reserve this week, where it is almost certain to announce a rate cut. The decision will be announced on Wednesday after the committee’s two-day meeting ends. It would be the first cut since the Fed began raising interest rates in March 2022.
Investors will also be looking for hints about the future of interest rates, particularly whether there is a possibility of additional cuts this year. After this week’s meeting, the Fed has only two meetings left on its calendar for 2024.
The main question in the markets now is how big the Fed will cut interest rates on Wednesday. Traders were pricing in a 67% chance of a 50 basis point cut in their latest analysis, up from last week’s 25 basis point cut.
Ahead of the Fed’s decision, investors will on Tuesday parse August retail sales data for clues about consumer sentiment. Economists surveyed by Dow Jones expect a 0.2% decline.
The latest figures on building permits, housing starts and existing home sales are also due later in the week. Elsewhere, monetary policy decisions from the Bank of England and the Bank of Japan are expected this week.
