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🔥Diminishing Expectations for a Rate Cut in June and Indicators of Economic Strength

Expectations for a rate cut during the monetary policy meeting in June have decreased since Friday, when employment data came in stronger than economists had anticipated. Additionally, the April services sector Purchasing Managers' Index data released on Monday hinted at economic strength, increasing pressure on short-term bond yields that are sensitive to monetary policy.

🕵️Kevin Flanagan, Head of Fixed Income Strategy at Wisdom Tree, stated, "Unless something negative happens between now and June, it means the Federal Reserve does not have to act," adding that short-term yields are prone to fluctuations given that the central bank had anticipated two cuts this year in March.

🚧Traders are also positioning themselves in anticipation of a delay in rate cuts through options markets, where the expiration date of one position protected against significant cuts has been extended for the second time in a few weeks.