US Treasuries Post First Weekly Advance Since Late November

(Bloomberg) — US Treasuries wrapped up the first weekly gain since the end of November after unexpectedly cool inflation numbers and a jump in the jobless rate cemented expectations that the Federal Reserve will cut rates at least twice next year.

While yields edged up on Friday, the 10-year Treasury rate declined four basis points in the week, while the policy-sensitive two-year yield fell by a similar amount as markets priced in a more dovish 2026 path.

Most Read from Bloomberg

Although markets had already been optimistic about further rate moves after last week’s Fed cut, the rally deepened after data showed the US unemployment rate hit a four-year high and core inflation came in at the slowest annual pace since early 2021.

“The direction of the surprises made sense,” Kelsey Berro, a fixed-income portfolio manager at JPMorgan Asset Management, told Bloomberg Television Friday. “Along the Treasury curve, we’ve been hanging out in the belly of the curve, the five- to 10-year point.”

Money markets now imply two full quarter-point cuts next year, with a 40% chance of a third. The move to price in more easing widened the gap between two-year yields and their 10-year peers to 67 basis points earlier this week, the most since January 2022 on a closing basis.

Still, comments Friday from Federal Reserve Bank of New York President John Williams, who said he sees no urgency to further adjust interest rates, weighed on Treasuries early in New York trading.

With the next major data releases not scheduled until January, investors are now taking a cautious approach heading into the new year. The ICE BofA MOVE Index, a gauge of expected bond-market volatility, is the lowest since 2021.

“The lack of clarity on the data will keep investors on their toes, but we see downside risks to rates as labor market worries persist,” US interest-rate strategists at TD Securities led by Gennadiy Goldberg wrote Friday. “Investors are likely to remain uncertain heading into year-end.”

–With assistance from Carter Johnson.

(Updates with latest prices, TD Securities commentary.)

Most Read from Bloomberg Businessweek

©2025 Bloomberg L.P.