Ezra Fieser and Carter Johnson Author
((Bloomberg) – Treasury debt jumped, traders increased their bets on reducing interest rates in September after Fed chairman Jerome Powell said it might be necessary to reduce it to support the labor market.
In the two-year notes, the yield in the notes reached 11 basis points, which is more sensitive to changes in monetary policy – falling to 3.68%, the lowest level in more than a week. Traders immediately cut a quarter of their bet next month, with a price of about 85% chance, about 65% from Powell’s speech before.
“The stability of unemployment and other labor market measures allows us to proceed carefully when considering a change in policy stance,” Powell said Friday in a speech prepared for the Fed’s annual meeting in Jackson Hole, Wyoming.
Greenguard played as low as a basket of peers as he spoke, and the Bloomberg market cap index fell 0.8%.
For bond investors, Powell’s comments help cement hope that policy rates will recover from December’s range of 4.25% to 4.5%. For weeks, the market has been introduced by data to a mixed picture of hawkish comments from the U.S. economy and other Federal Reserve officials.
Interest rate swaps related to the Fed meeting show that policymakers have made two cuts by the end of the year, with the first one being more likely to cut next month.
“He used his speech to consolidate expectations for 25 basis points in September,” James Bullard, former president of the St. Louis Federal Reserve and now dean of Purdue University’s business school, said on Bloomberg TV. “He leans towards the recent labor market report, which is very soft. I think it’s a completed deal.”
For Treasury bonds, the rally was the best day since August began, when a report showed the softness of the U.S. labor market.
“Transfer risk to weaknesses in the labor market and stay away from the stickiness of U.S. inflation,” Powell’s speech stated. “His comment further prepares for cuts in September.”
– With the assistance of Ye Xie.
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Last modified: August 22, 2025
