The yield on the U.S. 2-year Treasury fell on Tuesday following a disappointing consumer confidence report that hinted at potential economic issues. The 2-year Treasury yield decreased by 4 basis points to 3.536%, while the 10-year Treasury yield remained unchanged, hovering around 3.732%.
This movement came after the Conference Board’s Consumer Confidence Index was released, showing a decline to 98.7 in September, down from 105.6 in August. This marks the lowest level in over three years and was below the Dow Jones consensus estimate of 104, raising concerns about consumer sentiment and the overall economic landscape.
The movement in yields follows a surprising decision by the Federal Reserve last week to cut interest rates by 50 basis points, which startled many in the market and economic analysts. This larger-than-expected reduction has sparked worries regarding the robustness of the U.S. economy and whether it indicates underlying economic weaknesses.
Federal Reserve Governor Michelle Bowman expounded on her dissenting vote against the substantial rate cut, stating that a more gradual approach would have been a wiser choice. “I was concerned that such a large cut could be seen as a premature declaration of victory over inflation,” Bowman commented. “Maintaining our focus on returning inflation to the 2% target is crucial for ensuring a strong labor market and long-term economic growth.”
As yields and prices move inversely, market participants are closely monitoring economic indicators and the Fed’s upcoming decisions to assess the overall condition of the U.S. economy.
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