Treasuries Poised for Best Month Since 2008 Amid Rate Cut Hopes

According to Yahoo News, the U.S. Treasury market is experiencing a significant comeback, with 10-year notes on track for their best month since the 2008 global crash. Yields have dropped 61 basis points for November, while two-year paper yields have fallen 31 bps this week alone, marking the steepest drop since the U.S. mini-banking crisis in March. This shift comes after hints from Federal Reserve officials, including Governor Waller, who suggested that policy may need to be loosened if inflation continues to fall for several months. Markets are now fully pricing in a quarter-point rate cut in May, with a 50-50 chance for March. Fed Chair Powell's upcoming Q&A appearance on Friday has investors hopeful for further confirmation of rate cut plans. In addition to U.S. Treasuries, the European Union is set to release its own inflation data on Thursday, with analysts predicting a slowdown in the EU's HICP inflation to 2.7%, the lowest since mid-2021. This expectation has led to futures pricing in an ECB rate cut as early as April. The rapid decline in Treasury yields has weakened the dollar, with the dollar index on track for its worst month since November last year, losing 3.7%. The dollar has also fallen 3.1% against the yen and 3.8% against the euro for the month, while losing 2.6% on the yuan.