U.S. Treasury yields edge lower after manufacturing data cools bets on June rate cut

Treasury
yields
were
lower
on
Tuesday
after

robust
manufacturing
data
appeared
to
reduce
the
likelihood
of
the
U.S.
Federal
Reserve
cutting
interest
rates
in
June.

The
rate
on
the

10-year
Treasury
note
ticked
lower
by
around
1
basis
point
to
4.315%,
while
the
rate
on
the

2-year
note
was
2
basis
points
lower
at
4.693%.
Yields
and
prices
move
in
opposite
directions
and
one
basis
point
equals
0.01%.

It
comes
shortly
after
manufacturing
in
the
U.S.
expanded
for
the
first
time
in
17
months.
The

ISM
manufacturing
index
rose
to
50.3,
up
from
47.8
in
February
and
significantly
better
than
the
48.1
Dow
Jones
consensus
estimate.
The
index
measures
the
percentage
of
companies
reporting
expansion
against
contraction,
so
anything
over
50
indicates
growth.

Markets
interpreted
the
unexpected
return
of
U.S.
manufacturing
growth “as
reducing
the
chances
of
meaningful
Fed
rate
cuts,”
Dutch
bank
ING

said
in
a
research
note.

Last
month,
the
U.S.
central
bank

left
interest
rates
unchanged
for
the
fifth
consecutive
time,
in
line
with
expectations,
keeping
its
benchmark
overnight
borrowing
rate
in
a
range
of
5.25%-5.5%.
The
Fed
also
said
at
the
time
that
it
still
expects
three
quarter-percentage
point
cuts
by
the
end
of
the
year.

The
message
fueled
a
market
rally
in
the
U.S.
and
overseas,
with
benchmark
indexes

climbing
to
fresh
record
highs since.

Steven
Blitz,
chief
U.S.
economist
at
TS
Lombard,

told
CNBC’s “Squawk
Box
Europe”
on
Thursday
that
the
likelihood
of
one
or
no
Fed
rate
cuts
this
year
is
looking “pretty
good.”
Blitz
said
markets
would
continue
to
march
higher,
however,
even
if
the
Fed
decides
against
easing
policy
this
year.

“There
are
20
or
so
individual
Federal
Reserve
speeches
this
week
and
the
market
is
likely
thinking
that
[Monday’s]
outcome
will
make
officials
wary
of
committing
to
significant
policy
easing,”
James
Knightley,
chief
international
economist
at
ING,
said
in
a
note
published
Monday.

“Nonetheless,
there
are
also
a
lot
of
jobs
numbers
through
the
week,
culminating
in
Friday’s
non-farm
payrolls
figures
and
unemployment
rate.
It
could
be
a
choppy
week
of
trading
ahead,”
he
added.

—
CNBC’s
Jeff
Cox
contributed
to
this
report.