By Harshit
NEW YORK, Dec. 1 —
U.S. Treasury yields moved higher on Monday as investors began repositioning for a potentially stronger economic environment in 2026, driven by expectations that the Federal Reserve will deliver another interest rate cut at its final policy meeting of the year next week. The shift in bond markets comes as traders increasingly bet that the central bank is prepared to ease policy despite mixed economic signals, tightening financial conditions, and lingering uncertainty about the pace of global growth.
At 9:00 a.m. ET, the benchmark 10-year Treasury yield climbed 5.4 basis points to 4.073%, extending a modest rebound after last week’s declines. The 30-year Treasury yield rose 6 basis points to 4.731%, while the 2-year note yield increased 2.7 basis points to 3.518%, a move suggesting traders expect the Federal Reserve to maintain a dovish stance heading into 2026. One basis point equals 0.01%, and Treasury yields move inversely to price.
The CME FedWatch Tool shows a significant shift in market expectations. As of Monday morning, futures traders priced in an 88% probability that the Federal Reserve will cut the federal funds rate by 25 basis points at its December meeting, lowering the target range to 3.50%–3.75%. This is a notable rise from the 63% probability recorded one month ago, reflecting growing confidence that the Fed is prepared to loosen policy conditions to support economic momentum.
Market Snapshot: Treasury Curve Update
- U.S. 10-Year Treasury: 4.081% (+0.062)
- U.S. 30-Year Treasury: 4.735% (+0.064)
- U.S. 2-Year Treasury: 3.524% (+0.033)
- U.S. 1-Year Treasury: 3.615% (+0.013)
- U.S. 6-Month Treasury: 3.774% (+0.008)
- U.S. 3-Month Treasury: 3.816% (+0.020)
- U.S. 1-Month Treasury: 3.953% (−0.018)
The modest steepening of the Treasury yield curve suggests that investors are anticipating a more supportive economic backdrop next year, particularly if falling interest rates encourage higher investment, easing credit costs and increased business activity.
Bank of America Sees Global Growth Stabilizing in 2026
In a new outlook published Monday, Bank of America economists projected that global growth will bottom out in early 2026 and begin a moderate recovery, supported by interest rate cuts across major central banks, reduced geopolitical tension, and targeted fiscal measures in key economies.
The bank also forecast a weaker U.S. dollar, which could bolster U.S. exports and improve global liquidity conditions. A softer dollar environment traditionally benefits emerging markets and commodity prices, potentially contributing to a more synchronized global expansion.
Traders Await a Heavy Week of Economic Data
The bond market’s moves this week will be heavily influenced by a series of important U.S. economic reports. The data releases, which arrive during the Federal Reserve’s pre-meeting communications blackout, are expected to shape market expectations for the Fed’s December 9–10 policy decision.
Monday: ISM Manufacturing PMI
Scheduled for 10 a.m. ET, this survey is one of the most closely watched indicators of industrial health. Economists are assessing whether manufacturing activity is stabilizing following recent contractions.
Wednesday: ADP Employment Report & ISM Services PMI
The ADP private payrolls report will offer the most up-to-date snapshot of labor market conditions ahead of next week’s FOMC meeting.
The ISM Services PMI, representing the largest sector of the U.S. economy, will also be released and is expected to show whether service-sector demand is holding steady.
Thursday: Weekly Jobless Claims
Initial unemployment claims data will provide insight into labor market cooling and wage pressure—two key variables in the Fed’s inflation calculus.
Friday: PCE Inflation Report (Delayed September Release)
The Personal Consumption Expenditures (PCE) Index, the Fed’s preferred gauge of inflation, will cap the week. Analysts expect the delayed reading to show continued moderation in price pressures, supporting the case for further rate cuts.
With Federal Reserve officials unable to provide guidance during the blackout period, markets will rely on these data points for clues on future policy direction. The broader question for investors remains whether slower inflation can coexist with steady economic expansion—a balance that could determine Treasury yield trends heading into 2026.