Investors analyze U.S. Treasury yields amidst economic data scrutiny

Manufacturing Resurgence Pushes Treasury Yields to Four-Month High, Diminishing Rate Cut Expectations

Treasury yields have been on a rise for the past few days, with the 10-year note yield increasing to its highest level since November 28. This latest movement in Treasury yields came after news that manufacturing in the U.S. expanded for the first time in 17 months, as reported by the Institute for Supply Management (ISM). The ISM manufacturing index rose to 50.3, up from 47.8 in February and surpassing the Dow Jones consensus estimate of 48.1.

The yield increase was fueled by traders reconsidering their views on the possibility of the Federal Reserve cutting rates in June, given this positive economic news. The benchmark rate rose more than 3 basis points to 4.361%, briefly breaking above 4.4%. However, it is worth noting that yields and prices move in opposite directions, with one basis point equaling 0.01%. As such, when yields rise, prices fall and vice versa.

Investors are becoming increasingly cautious about the direction of rate cuts in the future following this unexpected return of manufacturing growth in the U.S., which has reduced market odds for a June rate cut from around 70% to around 58.8%. Dutch bank ING noted that markets interpreted this growth as reducing the likelihood of significant Fed rate cuts, as investors are now more likely to hold onto their investments until they see clearer signs of an economic slowdown or recession before making any decisions about adjusting their portfolios or taking on new debt obligations.

Last month, the U.S. central bank left interest rates unchanged for the fifth consecutive time, as anticipated by many investors and analysts alike. The Fed maintained its benchmark overnight borrowing rate in a range of 5.25%-5

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