Treasury yields bounced back on Tuesday as investors closely monitored a reversal of the previous day’s global market sell-off.
The yield on the benchmark 10-year Treasury note traded more than 7 basis points higher at 3.855% at 7:08 a.m. ET. It comes after the yield on the 10-year Treasury note on Monday fell to its lowest level since June 2023.
The yield on the 2-year Treasury note traded over 11 basis points higher at 3.992%. Yields and prices move in opposite directions, and one basis point is equivalent to 0.01%.
Global markets appeared on track to shake off Monday’s dramatic downturn.
U.S. stocks kicked off the month sharply lower, as fresh data prompted fears of a worsening economic outlook. The weaker-than-expected data led investors to worry that the Federal Reserve may be behind the curve in cutting interest rates to fend off a recession.
However, futures pointed to a rebound in equities, with those tied to the S&P 500 up about 0.9%.
Policymakers at the U.S. central bank on Wednesday held interest rates steady, although Fed Chair Jerome Powell gave investors some hope by signaling a September rate cut is on the table. Speaking Monday, regional Fed presidents Mary Daly of San Francisco and Austan Goolsbee of Chicago both gave indications that rate cuts are on the horizon without specifying when and to what degree.
“I’m more in the camp that says that this is a big summer thunderstorm, but this is not really now the start of something fundamentally changing in the real economy,” Carsten Brzeski, global head of macro for ING Research, told CNBC’s “Street Signs Europe” on Tuesday.
“I think what we are seeing right now is more of a kind of reality check for markets, especially when it comes to AI, and I hope and think we will have somewhat calmer waters ahead now.”
Brzeski said he expects the Fed to move forward with a 50 basis point interest rate cut next month in order to bolster market confidence.
“I don’t believe in these emergency meetings. For that, the situation is not severe enough, but I think it would be a good signal by Jerome Powell to start a rate cut cycle with 50 basis points because this would be really be symbolic,” he added.
U.S. trade deficit figures for June will be published Tuesday at around 8:30 a.m. ET.