European Bonds Rally and Oil Declines as Traders Anticipate Fed Rate Cuts

Treasury prices surged across the curve on Thursday, driving yields down by six to seven basis points—their steepest one-day drop in a week. The MOVE nearly erased gains spurred by stronger-than-expected May employment data, with 30-year bond auction yields falling to 4.84% from a peak of 4.98% earlier in the week.

"The inflation data have been very, very good for the last four months," said Tony Farren of Mischler Financial Group. "How many months of tame inflation can the Fed ignore?" Yields began retreating even before the Labor Department''s May producer price index and unemployment claims data, as traders scaled back Fed rate hike expectations amid cooling price pressures.

European bond markets followed suit, particularly UK gilts, while oil prices relinquished half of Wednesday''s gains. The US rally gained momentum, further pressuring yields downward.