The US Treasury has regained some of the ground lost last week, and the market is betting that the recovery of data will boost interest rate cut expectations

With UK government bonds leading the way, US Treasuries recovered some of last week's losses. Despite an early setback in the corporate bond market at the start of the week - Amazon issued $12 billion in dollar-denominated debt - its first dollar-denominated bond issue since 2022 - the rally held. Also on Monday, a measure of factory activity in New York state unexpectedly increased to its highest level in a year. Still, most Treasury yields fell by one to three basis points. Predictions had been that the eventual return of federal economic statistics following the six-week US government shutdown that ended last week would revive the prospect of the Federal Reserve cutting interest rates again next month. Interest rate strategists at Morgan Stanley predict that the yield on the 10-year U.S. Treasury note will fall to 3.75% by mid-2026, and could even reach 2.40% in the most bullish scenario. While the fate of some U.S. economic reports not released during the shutdown remains unclear, the Bureau of Labor Statistics said it will release September data on Nov. 20, originally scheduled for Oct. 3. The Federal Reserve cut interest rates by 0.25 percentage points in September and October, respectively, in response to signs of weakening labor demand, even as inflation remains above its 2% target.