• “The flows have been skewed toward buying out the curve” based on data favoring lower yields, said Gregory Faranello,
  head of US rates trading and strategy for AmeriVet Securities, referring to longer-maturity notes and bonds.

US government bond yields reached new 2025 lows Wednesday, with long-dated tenors falling at least 10 basis
points, after a gauge of service-sector activity weakened more than anticipated.

The economic data bolstered the view that the Federal Reserve’s interest rate remains at a restrictive level,
strengthening the case for cuts to resume later this year. The rally was already in progress before the ISM services gauge,
supported by the Treasury Department’s quarterly supply announcement suggesting increases remain several quarters away.
Yields stabilized but remained lower by at least four basis points across maturities. The benchmark 10-year fell as much as
10 basis points to 4.41%, the lowest level since Dec. 18. It peaked this year near 4.81% on Jan. 14.

“The flows have been skewed toward buying out the curve” based on data favoring lower yields, said Gregory Faranello,
head of US rates trading and strategy for AmeriVet Securities, referring to longer-maturity notes and bonds. For the 10-year
Treasury, he expects a range of 4.25% to 4.75% in the short term. The ISM services gauge for January declined more
than economists estimated, a related gauge of prices paid by businesses fell unexpectedly. Fed policy makers paused cutting
rates last month in response to signs that inflation remains sticky.

Shorter-dated yields declined less as economic signals have been mixed and the tariffs US President Trump has been
threatening to impose on major trading partners may keep Fed on hold. Economists at Morgan Stanley on Tuesday scrapped their
call for a March rate cut for that reason. The two-year yield declined only as much as five basis points to 4.16%, leaving it only about 25 basis points lower than the 10-year, the smallest gap in a month. Market-implied expectations for the Fed to resume cutting
rates after three moves at the end of last year have been bouncing around between June and September for several weeks.
Traders Wednesday ramped up wagers on a cut by June and continued to fully price in a cut by July.