Front end falls
US 2-year yields are down nearly 10 basis points since the surprise drop in ISM manufacturing. With the decline, they’re now below the 61.8% retracement of the September rally.
The drop hints that the Fed may need to get back to easing sooner rather than later. Comments from policymakers suggest a reluctance to cut further but also a highly data-dependent stance. The drop in the manufacturing survey shows the economy might be weaker than they thought.
It’s a big week for economic data wrapping up with the non-farm payrolls report. The Fed doesn’t meet until the end of the month but this will be the final look at all the major economic data before then.