By Edward Bolingbroke
(Bloomberg) – U.S. Treasury bonds have risen in nearly two weeks after traders bet on bets that the Federal Reserve will lower interest rates at the next meeting.
Tuesday’s inflation report was largely seen as benign by traders and cut the case in September, with some finding an increased likelihood of lowering 50 basis points.
The reduction in interest rate swaps over the next month is fully priced. The yield on the 10-year notes fell by 5 basis points to 4.24% in New York City during the entire term.
“The market tone has shifted to relaxed mode,” said Angelo Manolatos, rate strategist at Wells Fargo. “While the CPI report is far from the Fed’s dunk, it does allow central banks to gradually cut in the coming months.”
Earlier Wednesday, Treasury Secretary Scott Bessent urged policy makers to use the September meeting to start cutting cycles.
“We can do a series of tax cuts here, starting with a 50 basis point reduction in September,” Bescent said in a TV interview. Bloomberg Monitoring Wednesday. “We probably should be 150, 175 basis points.”
Investors have been pouring into swaps, choices and outright stock desires for stocks as labor market inflation and weaknesses accumulate, which will allow the Fed to start cutting.
This view has taken momentum from recent economic issuances, showing that consumer prices in July are largely in line with expectations, while the U.S. labor market has shown surprising weaknesses in the last month.
This also helps to cheer up that the Fed will lower interest rates by more than 25 basis points in September. Traders added about $2 million in premiums Tuesday to benefit from the move in positions with a secured overnight financing rate (SOFR).
The inflation report is “a little stronger than what we’ve seen in the previous months, but less than many people fear,” BlackRock Chief Investment Officer Rick Rieder said in a note. “As a result, we expect the Fed to start lowering interest rates in September, which can prove to lower the interest rate by 50 basis points.”
For the Fed, Tuesday’s report is far from clear. Despite rising commodity costs on tariff-driven price pressures, U.S. inflation has accelerated in July since the beginning of the year.
With more than a month remaining until the Central Bank meeting from September 16 to 17, the Treasury Bulls will need to review another major inflation report and key employment data.
“September is not a deal,” Claudia Sahm, chief economist at New Century adviser, said on Bloomberg TV. “We have not yet put this data in the package.”
However, the bet on the Fed is attracting attention at the moment. Bloomberg’s calculations show that options trading related to the SOFR September contract (now at about $5 million premium), could return as much as $40 million if they cut $5 million for the month for $5 million.
Meanwhile, investors have canceled long-term positions in the cash market in terms of the accumulation of inflation data, as indicated by a survey of JPMorgan Treasury clients, which covers the week ended August 11.
Visited once today, visited once today
Bloomberg Economic News Stock Market Fed Treasury
Last modified: August 13, 2025
