U.S. Treasury bonds rise as the market bets on more interest rate cuts ahead

U.S. Treasury bonds are heading for their biggest gain in over a week. The yield on the 10-year Treasury bond fell by 4 basis points to 4.05%, while the yield on the more rate-sensitive 2-year Treasury bond dropped to 3.52%. Swap trading suggests that the probability of the Federal Reserve cutting rates by another 25 basis points next month is about 80%, with the possibility of another rate cut in December. By the end of 2026, the Federal Reserve is expected to cut rates a total of 120 basis points, significantly higher than the three rate cuts indicated in the Fed's latest dot plot