Traders’ Bets on Fed Cut by June Reinforced by Softer Inflation

Bond traders’ expectations for the Federal Reserve to lower interest rates by mid-year got a boost after a cooler-than-expected US inflation reading.

Interest-rate swaps showed traders continue to all-but-fully price in a rate cut by the June policy meeting, with some chance of an earlier move but minimal odds of action this month on Jan. 28. While the market’s positive reaction to the data faded, Treasury yields across most of the curve ended the day lower following strong demand for the monthly 30-year bond auction.

“If we cut through the noise, it’s a pretty encouraging number,” said Dan Carter, ...