Treasury Yields Fall Before Fed Meeting

U.S. Treasury yields experienced a decline early Monday, with the 10-year Treasury yield falling nearly 3 basis points to 3.864% and the 2-year yield also dropping 3 basis points to 4.038%. This movement comes as investors prepare for significant events this week, including the release of the Federal Reserve's July meeting minutes and the highly anticipated Jackson Hole symposium. The relationship between yields and prices remains a focal point, as a basis point represents a 0.01% change. Market participants are still processing last week's positive U.S. retail sales and jobless claims data, which exceeded expectations and alleviated some concerns regarding the economy's health. This optimism has contributed to a boost in global stock markets. Currently, investors are fully pricing in a rate cut from the Fed in September, although the likelihood of a substantial 50 basis point reduction has decreased to 28.5%, according to CME's FedWatch tool. Looking ahead, the release of the Fed's July meeting minutes is scheduled for Wednesday, followed by the Jackson Hole symposium starting Thursday. Fed Chair Jerome Powell is set to deliver a key speech on Friday, which is expected to provide critical insights into the Fed's future monetary policy direction. Rashmi Garg, a senior portfolio manager at Al Dhabi Capital, indicated that while the symposium will offer important market cues, Powell is unlikely to specify the size of any potential rate cut. Garg anticipates a 25 basis point rate cut unless there is a significant downturn in the labor market, particularly highlighted in the upcoming September 6 jobs report.