U.S. Treasury yields experienced a decline on Tuesday, marking a pause in their ascent to multi-decade highs. The benchmark 10-year Treasury yield fell by over 2 basis points to 5.286%, retracting from its highest level since April 2002, which was recorded on Monday. Similarly, the 30-year Treasury yield eased by less than 1 basis point to 5.659%, pulling back from May 2002 highs. The 2-Year Treasury note yield also saw a decrease, dropping more than 3 basis points to 4.80%.
A basis point is equivalent to 0.01%, and it's important to note that yields and prices move in opposite directions.
Earlier on Monday, Treasury yields had surged significantly. The 10-year and 30-year yields hit 24-year highs following the release of fresh data from the Institute for Supply Management, which indicated a cooling of services sector growth. The Purchasing Managers' Index (PMI) reading for September was reported at 54.9, aligning closely with expectations but slightly below August's growth rate. However, the prices index component of the report saw an increase of 1.4 points, reaching 74.
Market participants are now factoring in approximately an 80% probability that the Federal Reserve will maintain current interest rates at its upcoming meeting, according to the CME Group's FedWatch tool. A key event for investors this week will be the release of the FOMC minutes from the September meeting on Wednesday. These minutes are expected to provide crucial insights into the future direction of monetary policy.
David Miller, CIO at Catalyst Funds, commented on the bond market's current signaling power, stating, "The bond market is sending a more important signal right now than the stock market. The Fed controls the short end, but it has far less control over the long end."
The bond market has been characterized by volatility over the last six weeks, as noted by Lisa Shalett, investment chief at Morgan Stanley Wealth Management. She attributed this volatility to several factors, including a potentially evolving Fed policy framework, ongoing economic growth, and elevated oil prices amid the protracted Middle East conflict. Shalett further observed that while intraday implied volatility has risen, the six-week period has not reached the extreme levels that preceded the 2022 equity bear market.
Traders work on the floor of the New York Stock Exchange (NYSE) on Sept. 29, 2026 in New York City.
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