Treasury yields slide after Williams suggests Fed could cut again in December

Treasury yields fell after New York Fed President John Williams signaled the Fed could cut rates at next month's meeting, with the 10-year down to 4.069% (‑3 bps), the 2-year to 3.507% (‑5 bps) and the 30‑year to 4.724% (down <1 bp). Williams said policy has become somewhat less restrictive and there is room to move the funds rate toward neutral, comments that pushed Fed funds futures to price a >70% chance of a December cut (up from under 40% a day earlier); however, the BLS cancellation of October CPI and a delayed payrolls report—showing stronger-than-expected job gains but a rise in the unemployment rate to 4.4%—leave the Fed's data-dependent path uncertain.

Analysis

Treasury yields moved lower after New York Fed President John Williams signaled the Fed could cut its policy rate at its final 2025 meeting next month; the 10-year fell to 4.069% (down ~3 bps), the 2-year to 3.507% (down >5 bps) and the 30-year to 4.724% (down <1 bp). Fed funds futures re-priced sharply: the CME FedWatch tool showed a rise to just over 70% probability of a December cut versus under 40% the prior day, indicating a rapid shift in market expectations following Williams' remarks.

Data developments complicate the outlook: the BLS canceled the October CPI release, removing a key data point ahead of the meeting, and the delayed payrolls report showed stronger-than-expected job gains alongside a rise in the unemployment rate to 4.4% (the highest since Oct. 2021). Equity markets had sold off earlier amid weaker sentiment on the rate outlook and valuation concerns in the AI trade, which amplified the intraday volatility in yields.

The market is trading a dovish pivot but with elevated data risk; the larger drop in the 2-year versus the 10-year suggests front-end rate expectations are most sensitive to Williams' comments. Investors should treat the rally as conditional on incoming data and Fed confirmation, not as a done deal, because the canceled CPI and mixed payrolls leave the Fed’s path data-dependent and prone to quick repricing.

Key Decisions for Investors

• Consider modestly extending duration exposure toward the front end (e.g., 2‑ to 5‑year Treasuries) to capture further downside in yields if the market’s >70% December-cut pricing holds, while keeping position sizes constrained due to data uncertainty
• Maintain close, intraday monitoring of Fed funds futures probabilities and the rescheduled CPI release as primary triggers to add or reduce duration exposure, since the BLS cancellation materially increases event risk
• Use hedges (short-dated put protection or interest-rate swaps caps) rather than outright large directional bets to protect against a rapid repricing if incoming data surprise hotter than expected
• Be selective in equities: cautiously add rate-sensitive sectors (e.g., REITs, utilities) if cut odds firm up, but avoid chasing high-valuation AI names that contributed to the recent sell-off until volatility and sentiment stabilize