The US Treasury market began the week on a firmer footing, with yields drifting lower in early trading, particularly at the longer end of the curve. The 10-year Treasury yield eased to around 4.27%, as buyers stepped in following strength in the UK gilt market after a softer-than-expected UK employment report. The move underscores how global bond markets remain interconnected, with investor sentiment often spilling over from one region to another.

Long-End Leads the Rally

The gains were most pronounced in longer maturities, resulting in a slightly flatter yield curve. The 2-year to 10-year spread narrowed to roughly 51 basis points, while the 5-year to 30-year spread edged in to just over 101 basis points. The flattening, while modest, reflects a market that is adjusting positioning without dramatically breaking from recent ranges.

Credit spreads across the Treasury curve were marginally wider—by roughly a quarter to half a basis point—driven again by the long end. This widening is consistent with the broader duration-led rally.

Primary Issuance and Market Positioning

Corporate bond issuance remains a key focus. After a busy week that saw over $40 billion in investment-grade deals come to market, expectations for the current week are similarly robust, with forecasts in the $40–45 billion range. The healthy pace of supply suggests that companies are still taking advantage of favorable funding conditions despite elevated benchmark yields.

In futures markets, trading activity overnight was relatively subdued. Positioning shifts indicate that some investors have added new short positions in the belly of the curve—particularly in the 10-year note futures—while trimming long positions in other maturities. Despite the quieter flows, both the 10-year and 30-year Treasury spreads remain well-supported, suggesting continued institutional demand for longer-dated paper.

Fed Policy Expectations Hold Steady

Expectations for Federal Reserve policy remain largely unchanged from last week. Pricing in futures markets still points to roughly 21 basis points of cuts by the September meeting, with a total of about 57 basis points expected by year-end. This is despite recent remarks from Federal Reserve Governor Michelle Bowman, who publicly endorsed the prospect of three rate cuts before the close of the year.

The market’s cautious response to these comments signals that traders remain focused on upcoming economic data—particularly inflation readings—before adjusting rate expectations in a meaningful way.

A Quiet Monday Before Key Data

With no significant economic releases or scheduled Fed speeches today, trading conditions are likely to stay relatively calm. Attention is firmly fixed on Tuesday’s release of the Consumer Price Index (CPI), which could provide a decisive cue for Treasury markets and set the tone for the remainder of the week.