Bond Traders React to Surprising US Manufacturing Data

Bond traders reacted swiftly to the surprising news that US manufacturing activity showed expansion for the first time since 2022. This caused a drop in the amount of Fed easing priced into swap contracts for this year, with odds of a first move in June dipping below 50%. The ISM manufacturing data for March exceeded all estimates, leading to a bond-market selloff and significant increases in Treasury yields. The market's response reflects shifting expectations for Fed policy, indicating potential turning points in the economy.