US Treasury bonds reached a key milestone on Tuesday. The difference between 10-year Treasury yields and 2-year Treasury yields reached the highest level in nearly 9 months, indicating that traders are betting that the Federal Reserve will cut interest rates in 2026. Although the yield did not change much, the 10-year US Treasury yield briefly reached more than 72 basis points for the first time since April. This phenomenon, known as a steeper yield curve, is due to the market's expectation that the Federal Reserve will further relax its policy. The surge in corporate bond issuance at the beginning of the year also intensified this trend and boosted long-term yields. Gregory Faranello, head of US interest rate trading and strategy at AmeriVet Securities, said that as yields fall to around 3% and 4%, respectively, the 2-year and 10-year US bond spreads may reach 1 percentage point this year, which will be the biggest gap since 2021. On Tuesday, the yield on 2-year treasury bonds was about 3.46%, and the 10-year treasury yield was about 4.17%. Both rose less than 2 basis points. The market's focus is on key employment data to be released in the next few days.

US Treasury bonds reached a key milestone on Tuesday. The difference between 10-year Treasury yields and 2-year Treasury yields reached the highest level in nearly 9 months, indicating that traders are betting that the Federal Reserve will cut interest rates in 2026. Although the yield did not change much, the 10-year US Treasury yield briefly reached more than 72 basis points for the first time since April. This phenomenon, known as a steeper yield curve, is due to the market's expectation that the Federal Reserve will further relax its policy. The surge in corporate bond issuance at the beginning of the year also intensified this trend and boosted long-term yields. Gregory Faranello, head of US interest rate trading and strategy at AmeriVet Securities, said that as yields fall to around 3% and 4%, respectively, the 2-year and 10-year US bond spreads may reach 1 percentage point this year, which will be the biggest gap since 2021. On Tuesday, the yield on 2-year treasury bonds was about 3.46%, and the 10-year treasury yield was about 4.17%. Both rose less than 2 basis points. The market's focus is on key employment data to be released in the next few days.