U.S. Treasury yields dropped Wednesday as investors assessed the outlook for the economy along with the spread between the 2-year and 10-year note yields.
The 10-year Treasury fell 6 basis points to 3.782%. The 2-year Treasury pulled back nearly 11 basis points to 3.781%.
Yields and prices have an inverted relationship. One basis point equals 0.01%.
Wednesday marked the first time since 2022 that the benchmark 10-year yield traded above its 2-year counterpart. The so-called inversion is typically seen on the Street as a warning signal that a recession is on the horizon.
Investors digested the latest economic data and considered what it could mean for the state of the U.S. economy.
Manufacturing production insights published Tuesday indicated weakness in the sector, which fueled concerns about an economic slowdown in the U.S. The data comes just weeks after recession fears and questions around whether the Federal Reserve should have already started cutting interest rates enveloped markets.
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Those concerns — which were sparked by a July jobs report that was weaker than expected — had, however, been eased somewhat since then through fresh economic data releases, including a gross domestic product print that reflected 3% growth in the second quarter.
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The August jobs report is slated for Friday this week, and investors will be parsing through it for fresh clues about the state of the labor market. Other labor market data due this week includes JOLTS job openings figures on Wednesday and ADP's employment change report.
The Fed is next set to meet later this month, when it will also announce its latest interest rate decision. Markets are widely pricing in a rate cut from the central bank then, but traders are still divided on how big the cut could be.
