Federal Reserve's Signal for September Rate Cut Boosts Treasury Yields

Expectations of an interest rate cut next month were bolstered by the latest Federal Reserve meeting's dovish minutes and a large revision lower in preliminary payrolls data.

The 10-year Treasury yield increased by more than 2 basis points to 3.799%, while the yield on the 30-year Treasury was roughly 1 basis point higher at 3.929%.

Prices and yields move in opposite directions, with one basis point equal to 0.01%.

The CME Group's FedWatch Tool indicates that traders are pricing in a roughly 66% chance of a 25-basis-point rate cut in September, with just over one-third pricing in a 50-basis-point rate cut, while market participants are firmly expecting an interest rate cut at the U.S. central bank's next meeting.

The Fed's July meeting summary indicated that most participants believed it would be appropriate to ease policy at the next meeting if the data continued to come in as expected.

On Wednesday, investors responded to a substantial reduction in U.S. employment data, which indicated that there were 818,000 fewer jobs than initially reported in the 12-month period ending March 2024.

The annual Jackson Hole symposium, which begins on Thursday, will feature Federal Reserve Chair Jerome Powell as a speaker on Friday.

The weekly initial jobless claims data will be made public at approximately 8:30 a.m. ET on Thursday.

The manufacturing purchasing managers' index (PMI) for August, services PMI for August, existing home sales data for July, and the Kansas City Fed's survey for August will be released at a later time during the session.

This report was contributed to by Alex Haring, Sophie Kiderlin, and Jesse Pound of CNBC.