Treasuries fall after strong factory gauge reduces rate‑cut bets

Treasury prices fell after the ISM factory gauge came in stronger than expected, including a firmer employment component, which reduced expectations for further Federal Reserve rate cuts.

Treasury prices fell after a stronger-than-expected ISM factory gauge and a firmer employment component within that survey. Policymakers at the Federal Reserve had paused after cutting rates at their previous three meetings. Inflation remains above the Fed's 2% target, and recent data have renewed debate about the path of policy. Commentators also noted that some potential nominees have been described as hawkish on policy and critical of the Fed's expanded balance sheet. Key points: - Treasury prices declined after the ISM factory gauge surprised on the upside. - The ISM report's employment component was stronger than economists had estimated. - Fed officials had paused following three prior rate cuts, and inflation still exceeds the 2% goal. - A Jefferies analyst described one potential Fed contender as consistently hawkish and critical of the Fed's expanded balance sheet. Summary: The immediate market effect was a drop in Treasury prices and a weakening of bets on additional rate cuts. Undetermined at this time.