The 2-year US Treasury yield fell 50BP in a few days, and the market bet heavily that the Federal Reserve will start rescue mode

Bond traders are betting that the U.S. economy is on the verge of deteriorating and that the Federal Reserve will need to start easing monetary policy aggressively to avoid a recession. Previous concerns about high inflation have largely disappeared, quickly giving way to new concerns that the economy will stall unless the central bank starts lowering interest rates from more than 20-year highs. This is driving one of the strongest gains in the bond market since concerns about a banking crisis broke out in March 2023. The rally was so strong that the policy-sensitive 2-year Treasury yield fell 50 basis points last week to less than 3.9%. Not since the global financial crisis and the dot-com bubble burst has this yield been so much lower than the Fed's benchmark rate, currently around 5.3%. (Jinshi)