U.S. Treasury prices climbed, propelled by a combination of safe-haven demand and supply-side considerations, pushing the 30-year bond yield down to its lowest level so far this year. By the close on Wednesday, yields had fallen across the board for all maturities, with declines ranging from 2 to 5 basis points.
The 30-year Treasury yield dipped below 4.80% for the first time this year, also falling below its 200-day moving average—a level it had not closed beneath since early December of last year. Factors fueling this rally included a decline in U.S. stock indices, additional safe-haven demand linked to the prospect of U.S. military action against Iran, and a Supreme Court decision to delay a ruling on tariff policy, which improved the U.S. fiscal outlook.
Supply-side factors also played a role. This followed two consecutive days of strong demand at Treasury auctions. Furthermore, the routine Treasury buyback operation conducted at 2 p.m. New York time on Wednesday specifically targeted bonds maturing in 20 to 30 years.
Additionally, a rally in UK government bonds provided further support for U.S. Treasuries. Earlier in the week, yields had initially moved higher as traders pushed back their expectations for the Federal Reserve's next interest rate cut to a later point in 2026.
Based on last week's employment report and the latest inflation data, the swaps market is currently pricing in a 25-basis-point rate cut for June, followed by an additional cut later this year. However, a growing number of traders in the options market are gradually ruling out the possibility of a Fed rate cut in 2026, instead betting that the central bank will hold rates steady throughout the entire year.
On Wednesday, Philadelphia Fed President Anna Paulson reiterated that, following the latest inflation data which confirmed her cautiously optimistic outlook, she still sees room for further rate cuts later this year. Meanwhile, Federal Reserve Governor Stephen Milan, a long-time proponent of significant rate cuts, stated that the Trump administration's deregulatory agenda provides additional justification for continuing to lower rates.
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