Expectations of interest rate cuts are rising, and US Treasury bonds are set to achieve their longest continuous increase in three years in July

Market expectations for interest rate cuts are high, and US Treasury prices continued to rise this month, poised to achieve the longest consecutive monthly gain in three years.

Due to the recent rise in US Treasury prices, the Bloomberg US Treasury Index, which tracks US Treasuries, saw a cumulative increase of about 1.3% in early July, with a return of approximately 3.9% since the end of April. July will mark the third consecutive month of gains, the longest monthly streak since July 2021.

On Monday this week, US Treasury prices continued to rise overall, with the yield on the benchmark 10-year US Treasury hitting a new low in over a week, kicking off this super central bank week. From noon on Wednesday to late Thursday, central banks in Japan, the US, and the UK will successively announce their monetary policy decisions, leading to what is being called the "most stimulating 32 hours" in global markets.

Renowned financial journalist Nick Timiraos, also known as the "New Fed News Agency," wrote last weekend that it is unlikely for the Federal Reserve to cut interest rates at this week's monetary policy meeting. However, with improvements in inflation, signs of cooling in the labor market, and a shift in the Fed's risk considerations from concerns about rising inflation to worries about increasing unemployment rates, the Fed will signal a rate cut this week to prepare for a cut in September.

Erik Nelson, macro strategist at Wells Fargo, commented on Monday that by looking at market pricing, it is evident that we are ready for a rate cut in September, which will definitely happen twice. He believes that the bigger question for the market is whether there will be six or more rate cuts.

Earlier on Monday, Wall Street News mentioned that some traders are even betting on a 50 basis point rate cut by the Fed in September. Analysts believe that this reflects the market's concerns about a recession. The steepening of the US Treasury yield curve and a significant cooling in the labor market support these aggressive market expectations, but economic data released at the same time shows strong economic vitality in the US.

Kate Moore, thematic strategy head at BlackRock, stated on Monday that Federal Reserve officials are facing difficult decisions now, as they want to remain cautious, especially before the US election. BlackRock expects the Fed to cut rates in September, likely three times this year, with another rate cut in the first half of next year, as BlackRock anticipates facing more downward pressure on inflation later on.

David Mericle, chief US economist at Goldman Sachs Research, stated that he expects the Fed's post-meeting statement this week to include some modified language, indicating that due to favorable data, Fed policymakers are more confident about the idea of a rate cut.

However, some analysts are cautious about rate cuts, believing that the fundamentals of the US economy are strong and do not require immediate rate cuts. JPMorgan Chase stated in a report last Friday that they expect Fed Chair Powell to "avoid holding any specific meetings for the first rate cut" and believe that there is currently not enough reason to support a Fed rate cut