Treasuries Rally as Markets Bet on Rate Cuts

​U.S. Treasuries extended their gains after the Federal Reserve reaffirmed its path toward lower interest rates, sending bond yields lower. The 10-year Treasury yield fell to 4.22%, while the two-year yield held steady at 3.97% as traders increased bets on two Fed rate cuts this year.

Fed Chair Jerome Powell signaled that growth is likely to slow in the coming months, and while inflation may rise temporarily due to tariffs, the central bank expects it to be short-lived.

Markets React to Powell’s Comments
The Fed’s decision to lower its growth outlook was seen as a validation of Wall Street’s concerns that Trump’s trade war and spending cuts will cool the economy. Traders now expect 64 basis points of rate cuts in 2025, up from 57 basis points earlier this week.
-Bond investors welcomed the shift, with short-term Treasury yields falling further.
-Stocks rallied, as Powell’s tone was less hawkish than expected.
-Traders are now watching for signals from the White House on trade policy, with a key announcement expected on April 2.
Despite Powell’s reassurance, BlackRock strategist Jean Boivin warned that the Fed is leaving the door open for upside surprises on inflation, which could limit the number of rate cuts.

Uncertainty Over Tariffs and Growth
The meeting came after weeks of market volatility, fueled by Trump’s tariff policies and recession fears. Powell downplayed the risks of a slowdown but acknowledged that uncertainty is unusually high.

While the Fed expects inflation to ease, Powell emphasized that policymakers will wait for more data before committing to deeper rate cuts.

For now, markets are betting on at least two rate reductions in 2025, but the final decision will depend on how tariffs impact inflation and economic growth in the coming months.




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