• US 10-year yield falls to lowest level in over two months

• Markets fully price two quarter-point rate cuts by year-end

Treasuries rallied as traders boosted bets on Federal Reserve interest-rate cuts, with US President Donald Trump’s tariff plans weighing on risk appetite.

Yields on 10-year US bonds fell as much as seven basis points to 4.33%, the lowest level in over two months. Money markets implied more easing from the Fed, fully pricing two quarter-point reductions this year for the first time in four weeks.

Markets are growing more confident that the US economy is weakening and interest-rate reductions will resume, as uncertainty around the Trump administration’s policies weighs on business expectations. An auction of two-year notes drew strong demand on Monday, after data Friday showed the services sector contracted for the first time in two years in February.

“Red flags are emerging for the US economy,” said Elias Haddad, senior market strategist at Brown Brothers Harriman. “Another month or two of poor US economic data would deliver a blow to the US exceptionalism narrative.”

Swaps are now pricing 53 basis points of easing from the Fed by the end of the year, compared to 48 basis points on Monday. The yield on two-year Treasuries fell five basis points to 4.12% as of 9:15 a.m. in London.

Focus turns to a speech from Federal Reserve Bank of Dallas President Lorie Logan in London on the future of the central bank balance sheet. Traders are alert for any clues the US central bank is set to pause or slowdown its balance-sheet runoff, after minutes from last month’s Fed meeting revealed discussions of the matter.