According to Odaily, bond traders are increasingly betting that the U.S. economy is on the brink of deterioration, prompting expectations that the Federal Reserve will need to significantly ease monetary policy to prevent a recession. Concerns over high inflation have largely dissipated, giving way to new worries that the economy will stall unless the central bank starts lowering interest rates from their highest levels in over 20 years.

This sentiment is driving one of the most significant rallies in the bond market since the banking crisis fears of March 2023. The surge is so strong that the yield on the policy-sensitive 2-year U.S. Treasury note fell by 50 basis points last week, dropping to below 3.9%. This yield has not been this much lower than the Federal Reserve's benchmark rate, currently around 5.3%, since the global financial crisis and the bursting of the internet bubble.