US Treasury Yields Ease as Investors Anticipate Sustained Rate Hikes

The US Treasury yields pulled back modestly on Monday as fixed-income investors took a breather following a recent pull-back in yields. The policy-sensitive two-year note yield inched down to 4.716%, easing after recently touching its highest levels since July 2024.

Meanwhile, the benchmark ten-year note yield fell to 4.948%, hovering just below the 5 per cent threshold it breached during last week's aggressive bond market sell-off.

Investors are re-aligning their portfolios to a new tightening cycle as market participants continue to parse the long-term implications of last week's Federal Reserve decision, which saw the central bank increase interest rates for the first time in three years.

Critically, allocators across Wall Street trading desks are pricing in the reality of a broader, sustained tightening cycle, with futures markets now pricing in a 55% probability that the Fed will follow up with another 25-basis-point rate hike at its upcoming October meeting.