US Bonds Head for Worst Week in Six Months Amid Doubts on Fed
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Elizabeth Stanton
Fri, December 5, 2025 at 8:55 AM PST 2 min read
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Bloomberg
(Bloomberg) -- Treasuries are on track for their worst week in six months as conflicting economic data have challenged expectations for how much the Federal Reserve might cut interest rates next year.
Yields were higher by three to four basis points shortly before midday in New York, with the 30-year bond’s reaching 4.79%, last seen in late September. While a much bigger selloff in Canadian government bonds Friday, sparked by stronger-than-expected employment data, was a factor, US yields were had already risen to weekly highs.
The US 10-year yield at 4.13% is more than 10 basis points higher since Nov. 28, the most in a week since June. Fed policymakers remain widely expected to cut interest rates at their meeting next week, however expectations for additional cuts next year have been pared amid mixed signals on the health of the US labor market.
“Expectations have been adjusted in a more hawkish direction for the Fed,” said Steven Zeng, an interest-rate strategist at Deutsche Bank. “Investors are growing skeptical of more rate cuts next year.”
Meanwhile, Friday’s delayed release of September personal income and spending data, which includes the inflation gauge the Fed aims to keep around 2%, showed that it accelerated to 2.8%, as economists estimated. Several Fed policymakers have said the inflation trend should forestall rate cuts.
Also hampering the Treasury market into next week, auctions of three-, 10- and 30-year debt are slated to begin Monday, a day earlier than usual to avoid coinciding with the Dec. 10 Fed announcements. Besides the rate decision, those will include policymakers’ quarterly summary of economic projections. Fed governors and regional bank presidents anonymously indicate their expectations for key indicators and interest rates over the next several years.
“Markets are probably looking ahead to the bond auctions and waiting for the December FOMC to hint at future direction,” said Evelyne Gomez-Liechti, a strategist at Mizuho International Plc.
Furthermore, next week is anticipated to bring most of the last of this year’s investment-grade corporate bond supply, concentrated on Monday and Tuesday ahead of the Fed.
The bulk of this week’s move in yields came on Monday, fueled by a deluge of corporate debt sales and a warning of potential rate hikes from Bank of Japan Governor Kazuo Ueda. Any signal that the BOJ might tighten policy can ripple across global bond markets, pushing yields higher elsewhere.
--With assistance from James Hirai and Laura Avetisyan.