US two-year Treasury yield hits 18-month low

• US two-year yield hit the lowest level since December.
• Markets expect the Fed to cut rates by 68 basis points this year.

The yield on the US two-year Treasury note fell to 1.806% on Monday, the lowest level since December 2017, as traders increased their bets the Federal Reserve would begin easing cycle next month to avert global recession.

The Fed funds futures implied traders saw a 53% chance the US central bank would cut rates by 25 basis points to 2.00%-2.25% at its July 30-31 policy meeting. Notably, those odds were below 20 percent in early May.

Further, the Fed funds futures indicated the Fed would cut rates by 68 basis points this year, according to Bloomberg.

As a result, the two-year yield, which is sensitive to interest rate expectations, dived to 18-month lows. As of writing, the yield is seen at 1.856%, having dropped more than 30 basis points in the last three days.