U.S. Treasury Yields Fall After Fed Chair Signals September Rate Cut

U.S. Treasury yields across various maturities declined following Federal Reserve Chair Jerome Powell's remarks that cautiously signaled a potential rate cut in September. Powell pointed to increasing risks in the labor market despite ongoing inflation concerns, suggesting that the Fed may adjust its policy stance given the restrictive current policy environment. This led traders to sharply increase bets on a 25 basis point rate cut, with interest rate swaps showing over an 85% probability of such a move. The 10-year Treasury yield fell to around 4.26%, the 2-year yield dropped to about 3.69%, and the 30-year yield declined to approximately 4.88%. Powell's speech shifted market focus from persistent inflation to weakening labor market conditions, prompting a retreat in the dollar and a sharp fall in benchmark Treasury yields. Analysts interpret this as a dovish pivot by the Fed, opening the door to easing monetary policy later this year.