US bond traders are closing out a volatile first half of 2025 with unexpected profits — and many are setting up for further gains after a three-week winning streak, with Thursday’s jobs report looming as a key catalyst.
The Treasury market is wrapping up its strongest monthly performance since February and its best first-half stretch in five years, overcoming turbulence from President Donald Trump’s unpredictable policies, tariff uncertainties, geopolitical flare-ups, and a recent Moody’s downgrade.
As June ends, some pressures have eased. Benchmark 10-year Treasury yields have fallen near two-month lows, hovering around 4.26%, and traders have largely set aside worries about Trump’s tax plan — which could face a Senate vote as soon as Monday — to focus instead on the Federal Reserve’s next moves. Markets are increasingly confident the Fed will cut rates at least twice before year-end.
“There’s a market lean towards the Fed cutting rates and a bit of a fear of missing out,” said George Catrambone, head of fixed income at DWS Americas. Catrambone said he’s been adding interest-rate exposure — including 30-year Treasuries — as strong foreign demand continues to support the market.
Odds of a July rate cut have climbed from negligible earlier this month to nearly a 20% chance now, while a September cut is considered a near certainty. Despite Fed Chair Jerome Powell and colleagues signaling a cautious approach as they await clearer economic data, traders are positioning for potential early action if employment shows significant weakness and inflation remains subdued.
The jobs report due Thursday could prove pivotal, offering fresh clues on the labor market’s health and potentially accelerating or delaying the expected Fed pivot.