The market's expectation for a rate cut by the Federal Reserve is rising, causing the yield of the 10-year US Treasury bond to approach that of the German bond.

Notice that, as traders bet on further interest rate cuts in the United States and increased borrowing in Europe, US Treasury yields have fallen this month, with yields approaching German bond yields. The yield spread between the two countries' 10-year bonds narrowed to 184 basis points on Tuesday, the smallest gap since October. This spread is expected to see the largest monthly decline since May. This trend highlights a shift in the market sentiment since the beginning of the year, when the market expected US Treasury bonds to struggle due to persistently high inflation rates and the new government's focus on stimulating economic growth. However, with growing concerns about the economy, the 10-year US Treasury yield has dropped by 30 basis points in just two weeks, reaching its lowest level of the year. US Treasury Secretary Besanto stated on Tuesday that 10-year Treasury yields should "naturally" decline with the implementation of President Trump's policies, sparking bullish bets. On Wednesday, the yield paused its recent trend, edging up by one basis point to 4.31%. Meanwhile, German bond yields have remained almost unchanged this month, trading around 2.45% on Wednesday, as investors anticipate the new government may borrow more funds after Sunday's elections. This is partly in response to President Trump's calls for Europe to invest more in strengthening military forces. The spread between 2-year bond yields has also narrowed, as traders expect the Federal Reserve to further cut interest rates this year due to recent weak US economic data. Swap trading indicates that rates could be lowered by over 50 basis points by December, compared to just 25 basis points two weeks ago.