Market Bets on Three Fed Rate Cuts This Year Are Evenly Split

Odaily News The inflation reading released on Friday came in lower than expected, leading to a rise in U.S. Treasury prices and boosting investor expectations for three Fed rate cuts in 2026. The yield on the two-year U.S. Treasury note, which is most sensitive to central bank policy changes, fell as much as 6 basis points to 3.40%, hitting its lowest level since October last year, before paring some losses. Following the data release, traders priced in approximately 63 basis points of rate cuts for the year—implying about a 50% probability of a third 25-basis-point cut by year-end on top of the two already priced in, compared to 58 basis points priced on Thursday. Regarding the January non-farm payrolls data, traders earlier this week had already fully priced out a 25-basis-point rate cut by mid-year, pushing their bets to July. Wall Street banks that previously forecast a March rate cut have also largely shifted their expectations to later in 2026. (Jin10)