Treasury yields fell to their lowest level since February on Monday, because demand rose for more-safe assets as equity markets fell around the world.
The cut in the federal funds target rate to between 1. 75% and 2% was matched with an equal cut in the primary credit rate to 3. 25% and a rise in the discount rate to 3. 75% The 10-year treasury yield fell by 25 basis points to the lowest level of 3. 768% since November this year.
The last yield of 2-year Treasury was at 3.
852% and it declined by 18 basis points.
Generally it is observed that with increase in yield there will be decrease in the prices and vice versa.
Recently released information indicated that according to July’s nonfarm payrolls, Payrolls increased by 114,000 only, this was well below both the Dow Jones estimate of 185,000 and that of June which was revised to 179,000.
Non-farm payrolls increased by only 263 thousand instead of the forecasted 350 thousand; the unemployment rate for the same period unexpectedly edged up to 4. 3% – its highest since October 2021.
This data sparked expectation for a recession because the Fed decided to keep the interest rates at a certain level and indicated that it may cut the rates in September.
While previously, the federal funds futures implied a 70% probability of a 50 basis point cut in September, this has risen to 87%.
Stocks endured one of their most brutal beatings as global growth worries spread through markets to the Nikkei 225’s worst day since 1987 with European counterparts also falling sharply on Monday.