US Treasury yields dipped on Tuesday after the Federal Reserve signaled it is likely to implement only one interest rate cut in 2025, prompting investors to adjust their expectations for monetary easing, CNBC reports.
The benchmark 10-year Treasury yield declined by 2 basis points to 4.455% as of early morning trading, while the 30-year yield slipped nearly 3 basis points to 4.924%, retreating after briefly topping 5% on Monday. The yield on the 2-year Treasury also edged down slightly, falling to 3.97%.
Yields move inversely to bond prices, and a single basis point equals 0.01%.
The shift in yields follows recent remarks from Federal Reserve officials suggesting a more conservative approach to rate reductions. Atlanta Fed President Raphael Bostic stated Monday that he currently expects just one rate cut this year, citing the persistent impact of tariffs and the need to cautiously manage inflation risks without triggering a slowdown.
Earlier Fed projections from March had anticipated two 25-basis-point cuts in 2025. Bostic’s comments, however, indicate growing concern that inflationary pressures may be stickier than previously thought, partly due to external trade-related factors.
Adding to the cautious sentiment, Moody’s Ratings last week downgraded the US sovereign credit rating from Aaa to Aa1, placing it in line with earlier moves by S&P Global Ratings and Fitch in 2011 and 2023, respectively. Despite the downgrade, analysts suggest the market impact is limited.
“The downgrade is admittedly dire on paper, but inconsequential for markets,” said Vishnu Varathan, head of macro research at Mizuho Securities.
He emphasized that US Treasurys remain a cornerstone of global financial markets due to their depth, liquidity, and status as a reserve asset tied to the US dollar.
Treasury markets also reacted in April to policy signals from former President Donald Trump, who proposed sweeping reciprocal tariffs on foreign trade partners. While some of those proposals have since been moderated, they contributed to volatility in yields amid concerns over their potential economic effects.
Despite these developments, short-term Treasury instruments showed mixed movements. The 1-month and 3-month Treasury yields rose slightly, to 4.374% and 4.397% respectively, reflecting near-term uncertainty. The 6-month and 1-year yields also edged higher.
