US Short-Term Treasuries Gain as Traders Boosts Rate-Cut Bets

Short-term Treasuries rallied following a mostly benign report on US inflation that prompted traders to boost expectations the Federal Reserve will cut interest rates next month.

The rally pushed yields on two-year notes — which are more sensitive to changes in monetary policy — down by four basis points Tuesday afternoon to 3.73%. And swap traders priced in nearly 90% odds of a Fed rate cut on Sept. 17, up from about 80% before the data.