Treasury yields were lower on Friday after New York Federal Reserve President John Williams offered some hope to investors that the Fed may lower its key interest rate at its final meeting of 2025 next month.
The yield on the benchmark 10-year Treasury fell more than 2 basis points to trade at 4.083%. Yields across the maturity curve ticked lower, with the 2-year Treasury yield shedding more than 2 basis points to 3.535% and the longer-term 30-year Treasury‘s yield being down less than 1 basis point at 4.727%.
One basis point equals 0.01% and yields and prices move in opposite directions.
In remarks for a speech in Santiago, Chile, Williams said that he thinks the Fed is able to cut rates again, adding that “modestly restrictive” monetary policy has become “somewhat less so” since the central bank approved cuts at its October and September meetings.
“I still see room for a further adjustment in the near term to the target range for the federal funds rate to move the stance of policy closer to the range of neutral, thereby maintaining the balance between the achievement of our two goals,” he said in remarks for a speech in Santiago, Chile.
Fed funds futures traders increased their bets for a December cut following Williams’ remarks, pricing in about a 70% likelihood, the CME’s FedWatch tool showed.
Expectations had fallen drastically in recent weeks. In the day prior to Williams’ comments, money markets were pricing in less than a 40% chance of a cut next month.
The Bureau of Labor Statistics on Friday made it even more difficult for the data-dependent Fed to make a decision next month, saying it canceled the release of the October reading for the consumer price index.
Yields had taken a dive earlier Friday following Thursday’s sell-off in U.S. equities, a move spurred by increasing pessimism toward the rate outlook and concerns over valuation levels in the artificial intelligence trade.
Global markets are also digesting Thursday’s delayed nonfarm payrolls report, which showed the economy added more jobs than expected in September, but the unemployment rate also rose to 4.4% — its highest level since Oct. 2021.
