How is the US Economy Doing? How Many Interest Rate Cuts Will There Be This Year? Experts Weigh In

U.S. Treasury yields continued to rise today after data showed the world's largest economy shrank in the first quarter of the year and a strong government bond auction.

The developments strengthened investors' expectations that the Fed will cut interest rates twice by early 2026.

The strong demand for the Treasury Department's new bond issue showed that the “sell” pressure on U.S. assets was temporary. This strong interest in bonds also supported the buying wave that has continued over the last three days.

The latest GDP revisions showed growth slowing due to weak consumer spending. This has pushed bond yields lower, leaving markets holding out hope that the Fed will cut rates in October. Futures are pricing in a total rate cut of 55 basis points through January 2026.

“The direction of the bond market will be shaped by the impact of uncertainties on growth. The Fed will remain on hold as much as possible. The two rate cuts priced in for this year seem reasonable,” said Subadra Rajappa, head of US interest rate strategies at Societe Generale.

Meanwhile, as White House officials downplayed the court blocking of President Donald Trump’s sweeping tariff plan, investors appeared to turn their attention to economic data, with ongoing jobless claims reaching the highest level since November 2021, signaling a weakening labor market.

“Some of the details in this morning’s GDP data and rising jobless claims were positive for bond markets,” said John Canavan, an analyst at Oxford Economics.

Two-year Treasury yields fell about five basis points to 3.94%, while 10-year bond yields fell five basis points to 4.42%. At the same time, the dollar weakened.

*This is not investment advice.