US Treasury Yields Plummet as Fed Officials Diverge on Interest Rates

US Treasury yields have seen significant declines following Federal Reserve Chair Kevin Warsh's speech at Jackson Hole, erasing some of the gains recorded after his presentation. The 2-year yield fell by 0.9%, or 4 basis points, while the 10-year and 30-year bonds saw smaller decreases.

FOMC member Christopher Waller delivered a more dovish stance than Warsh, highlighting specific factors he would consider when making the September decision. He noted that core inflation appears better than the main indicators suggest and stated that if the upcoming CPI reading on September 11 doesn't present a negative surprise, he will likely support maintaining interest rates at an unchanged level.

This led to a dovish repricing in the market, with the probability of a rate hike in September dropping to around 50% from over 60% yesterday. The ADP data released today also showed weak job growth, with new employment falling for the third consecutive month and reaching its lowest level since January.