The U.S. 10-year Treasury yield climbed 6 basis points to 4.22% in Sunday Asia trading, while the policy-sensitive 2-year yield rose 8 basis points to 3.91%. Fed funds futures contracts now imply just a 58% probability of a 25 basis point cut at the May 1 FOMC meeting, down sharply from 84% on Wednesday and 91% one week ago.
The repricing reflects rapid de-risking after the Iran ceasefire, the upgraded IMF growth forecast lifting 2026 global GDP to 3.4%, and Friday's release of the Atlanta Fed GDPNow tracker, which now estimates first quarter U.S. growth at 3.1% — well above the 2.4% consensus heading into the print.
Powell Speech Looms Tuesday
Fed Chair Jerome Powell is scheduled to deliver remarks Tuesday at the Economic Club of New York, his last public appearance before the FOMC enters its blackout period ahead of the May 1 decision. Markets will scrutinise his framing of the inflation–growth tradeoff, particularly given that core PCE — the Fed's preferred inflation gauge — printed at 2.7% year-on-year for March, still above the 2.0% target.
New York Fed President John Williams said Friday that "the case for additional easing is less compelling than it appeared in late March," language that traders interpreted as a signal that voting members may opt to hold rates steady at the 4.25%–4.50% range. Atlanta Fed's Raphael Bostic offered similar comments to CNBC on Saturday morning.
Curve Steepening Pressure
The 2s10s yield curve steepened to +31 basis points from +18 basis points on Tuesday, reflecting expectations that easier monetary policy will be deferred while term premium rebuilds. The 30-year long bond yield rose 7 basis points to 4.62%, its highest reading since late February.
Treasury auctions resume Wednesday with $48 billion of 5-year notes, followed by $44 billion of 7-year notes Thursday. Bid-to-cover ratios are likely to be closely watched for signs that foreign demand has wavered after the dollar's recent decline.
Outlook: 50–50 Coin Flip on May Cut
JPMorgan rate strategist Jay Barry trimmed his year-end 10-year yield target to 4.10% from 3.85%, while flagging a wider range of 3.95%–4.40% over the coming month. "The disinflation impulse remains intact — energy prices are collapsing — but the labour market resilience and removal of geopolitical drag complicate the path lower," Barry wrote.