2025.03.2113:10:30UTC+00US 10-Year Yield Falls to 4.2%

On Friday, the yield on the 10-year US Treasury note declined to 4.2%, nearing its lowest level in more than two weeks. This movement reflects ongoing market evaluations of potential economic deceleration and the Federal Reserve's prospective responses. This week, the Federal Reserve opted to maintain current interest rates; however, its dot-plot projections revealed that policymakers anticipate two 25 basis point rate reductions this year, in light of diminished growth and elevated unemployment rates. Consequently, traders are now factoring in the possibility of three rate cuts by the Federal Reserve this year, an increase from earlier predictions of just two. This adjustment occurred despite inflation forecasts being higher, although Federal Reserve Chairman Jerome Powell pointed out that policymakers consider the inflationary effects of tariffs to be temporary. Bonds gained additional support from the Federal Reserve's decision to slow its balance sheet reduction in response to indications of waning liquidity. The Fed will now decrease its Treasury holdings by $5 billion monthly instead of the previous $20 billion, while the $35 billion monthly reduction for Mortgage-Backed Securities (MBS) remains unchanged.