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U.S. government bonds went up Friday after Fed Chair Jerome Powell said the central bank might cut interest rates as soon as next month. But with important inflation and jobs data still to come, markets could shift again before the Fed’s September 17 meeting. Powell pointed to ending the eight-month pause in easing, saying labor-market risks may “warrant adjusting our policy stance.” Treasuries rallied, and the gap between short and long maturities widened by the most in four years. Markets stopped short of calling a cut a certainty. Futures put the odds of a quarter-point move in September near 80%. Yields, though lower, did not break this month’s lows as traders waited for employment and inflation reports due before the decision. The move showed the Fed weighing a weakening job market against the risk that President Donald Trump’s tariffs could push inflation up again. All eyes on inflation gauge and bond auctions The Fed’s preferred inflation gauge may show firm pressures, and Treasury auctions of two-, five-, and seven-year notes will test demand. “Powell solidifies market expectations of a cut in September,” said Gregory Peters, co-chief investment officer at PGIM Fixed Income. “It’s less about whether the move comes in September or October. We don’t know what the next six months will look like. It’s still going to be an environment of mixed data, keeping the bond market on edge.” Short-dated yields led Friday’s move, as per Bloomberg. The two-year note fell 10 basis points to 3.7%, near its early-August low after a weak jobs report. In swaps, traders priced two quarter-point reductions by year-end, with a small chance of a third, as reported by Cryptopolitan. That pricing “is the appropriate reaction,” said John Briggs, head of U.S. rates strategy at Nataxis North America, but “anything further than two-and-a-half cuts…

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Filed under: News - @ August 24, 2025 7:27 pm