Bond investors are eager to hear Federal Reserve Chair Jerome Powell's remarks on Wednesday to sustain the ongoing rally in the $29 trillion Treasury market. This year, US government debt has yielded a return of 2.4%, causing yields to drop to their lowest levels since 2025 due to factors like a stock market decline and trade tensions initiated by President Trump's tariff policies. Powell had previously mentioned that the economy is performing well, but investors will closely analyze his comments post the Fed's March meeting to detect any cracks in this optimistic view.

The market is swift to adjust its outlook, as indicated by rates strategist Ed Al-Hussainy, especially in light of minimal changes in data between December and now but an expansion in potential scenarios. While the likelihood of the Fed decreasing interest rates this month is practically zero, uncertainty is rising for the remainder of the year. Traders were previously anticipating around three rate cuts by the end of 2025, but that number has now decreased to approximately two, leading to more hedging by traders. Some investors, like Mark Howard from BNP Paribas, are reevaluating their strategies, focusing on economic indicators and foreseeing an inflationary impact from tariffs that could hinder the Fed's rate-cutting intentions for this year.

The two-year Treasury note's yield has steadily declined this year, hitting its lowest point at 3.83% on March 11, showing sensitivity to changes in US monetary policy expectations. This decline was influenced by White House statements hinting at a temporary growth slowdown due to budget reductions, contributing to corrections in the stock market and gold reaching all-time highs.