The yield on the 10-year US Treasury note dropped nearly 5 basis points to 4.08% on Wednesday as signs of labor market weakness bolstered expectations for a near-term Federal Reserve rate cut. ADP’s high-frequency data showed private employers cutting roughly 11,250 jobs per week in the four weeks to October 25, raising concerns while the government shutdown delayed the closely watched monthly jobs report. Markets now price in about a 68% chance of a 25 bps rate cut in December, up from roughly 62% a day earlier. At month-end, the Fed is expected to pause its balance sheet runoff and boost Treasury bill purchases to offset maturing MBS assets. Meanwhile, optimism grew that the record-long shutdown could end soon, with the Republican-controlled House poised to approve a bill restoring funding to key departments and agencies.
