U.S. Bond Market Focuses on Federal Reserve Meeting and Auctions, Traders Bet on Rate Cuts by Year-End

On April 27, as the situation in the Middle East drives up oil prices, traders in the U.S. Treasury market are closely monitoring this week’s Federal Reserve meeting to assess officials’ views on the inflation outlook. The market generally expects the Fed to maintain interest rates on Wednesday, but traders tend to believe that rate cuts will still occur before the end of the year. Data from the swap market on Friday indicated that the probability of a rate cut by year-end has risen to around 40%. This trend may pave the way for Kevin Warsh, nominated by Trump, to lead the Fed and implement more accommodative policies. In this context, traders will carefully listen to remarks from current Chairman Powell during the post-meeting press conference for the latest information on his plans after his term ends in May next year. Meanwhile, a series of Treasury auctions, including 2-year and 5-year notes, will also take place this week to test market demand at current yield levels.