The US Treasury market ended 2024 with a small gain as inflation resumed edging lower after the first quarter and the Federal Reserve cut interest rates three times.
The gain was smaller than the market’s 2023 advance, which followed two straight annual losses for an asset class whose interest payments normally offset price declines caused by rising yields.
Until nearly the end of April, Treasury debt was on track for a loss as yields approached their 2023 highs. Halting progress toward lower inflation forced forecasters to scrap predictions the Fed would cut rates by as much as two percentage points by year-end.
But the market reversed course and yields reached their lowest levels of the year in mid-September as more favorable inflation trends put Fed rate cuts back on the table. The three rate cuts — in September, November and December — totaled one percentage point, bringing the central bank’s target range for the US overnight interest rate to 4.25%-4.5%.
At the low point for yields in mid-September Treasuries had a 4.7% YTD gain. It eroded as the US presidential election in November, along with a pattern of stronger-than-anticipated economic data, curbed the outlook for additional Fed rate cuts in 2025.
Still, the Fed’s policy shifts held down short-maturity yields, causing the 10-year to exceed the 2-year, and the 30-year to exceed the 5-year by more than half a percentage point, both for the first time since 2022.
For 2025, many US interest-rate strategists expect short-term rates to decline by at least 50 basis points, 10-year yields by about 30 basis points.
This article was generated from an automated news agency feed without modifications to text.
