FX.co ★ Treasury Yields Slightly Down

The yield on the US 10-year Treasury note pared earlier losses to trade slightly lower, around 4.48% on Monday, as investors returned from the long holiday weekend and assessed the latest economic data. The ISM Services PMI signaled a modest cooling in services sector growth, broadly in line with expectations. At the same time, price pressures eased to their lowest level since February, while employment in the sector registered its strongest increase since late 2021.

This report followed last week's weaker-than-expected labor market data, which had prompted investors to scale back expectations for additional Federal Reserve rate hikes this year. In parallel, oil prices have fallen back to pre-conflict levels, helping to alleviate concerns about renewed inflationary pressures.

Markets are now assigning a 56% probability to a Fed rate cut as early as September, down from roughly 64% prior to the release of the latest jobs report. Attention will now turn to the release of the FOMC minutes later this week, as investors look for further guidance on the Fed's policy outlook.