This week, U.S. Treasury yields have drifted down again as markets grow more confident that the Federal Reserve will cut rates in December and possibly keep easing into 2026. The 10‑year note briefly slipped below 4% on Tuesday, its first break of that level in nearly a month, according to the Wall Street Journal, while Bloomberg reported it touched lows near 4.03% in a three‑day rally.
The catalyst is a combination of dovish Fed rhetoric and softer data. New York Fed President John Williams and San Francisco Fed President Mary Daly signaled openness to a near‑term cut, which, alongside shutdown‑delayed reports showing modest wholesale inflation and weaker retail sales, encouraged traders to mark down the expected policy path. CME FedWatch now shows markets pricing an 80–85% chance of a quarter‑point cut in December, a sharp rise from roughly 50% a week earlier.
Politics are adding another twist. Treasury Secretary Scott Bessent told CNBC that President Trump has a “very good chance” of naming a new Fed chair before Christmas, with National Economic Council director Kevin Hassett seen as the frontrunner and favored by allies for his preference for lower rates. That prospect reinforces expectations for an easier stance, even as some Fed officials worry that robust productivity and solid pre‑shutdown GDP complicate their assessment of how much support the economy really needs.
Lower yields help ease financial conditions for households and companies, supporting equities and housing affordability at the margin. But they also reflect rising concern that growth could slow more sharply if consumer fatigue and labor‑market cooling deepen. Investors are effectively betting that the Fed will err on the side of cushioning downside risks, despite incomplete data and ongoing inflation above the 2% target.
