Treasury ‘Melt Up’ Grows as Bond Traders Price Fed Cut by May
- Fed swaps previously showed a 25-basis-point reduction in June
- Treasuries extended their gains, adding to returns this month
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Bond traders ramped up their bets on an abrupt end to the Federal Reserve’s tightening cycle, pricing in the first interest-rate cut by May as a so-called “melt up” in bond prices continues.
Yields on two-year Treasuries fell as much as 10 basis points on the day. Swap contracts referencing Fed meeting dates repriced to levels consistent with the policy rate declining by a quarter percentage point from its current range of 5.25%-5.5%; a reduction was previously seen happening a month later in June.