PCE data boosts rate cut expectations U.S. Treasury yields largest monthly gain since 2024

On June 28, U.S. Treasury bonds are expected to record the largest monthly pump of the year, after a slowdown in a core inflation measure favored by the Federal Reserve boosted market expectations for interest rate cuts this year. The 10-year yield fell about 2 basis points to 4.26% on Friday, and the monthly decline widened to 23 basis points, expected to be the largest since December. The 2-year yield falls about 2 basis points to 4.68%, extending its June falls. Intrerest rate swap traders expect a rate cut of about 45 basis points this year, with a sure cut by the end of November. “The data was fully in line with expectations, but the bond market knew the Fed’s agenda,” said Thomas Tzitzouris, head of fixed income research at Strategas Securities. “They want to cut rates and do so as soon as possible.” “Our internal view is that the Fed will cut rates for the first time in December,” Meghan Swiber, U.S. Intrerest Rate Strategist at Bank of America, said ahead of the data. “We’ve seen an improvement in services inflation data lately, but the Fed would like to see a more lasting improvement.”