The U.S. Treasury bond market is expected to see a monthly increase for the third consecutive month, marking the largest upward trend in three years. Market pricing indicates that investors are prepared for a rate cut by the Federal Reserve in September, with the current question being whether there will be additional cuts.

Due to the recent rise in U.S. Treasury bond prices, the Bloomberg U.S. Treasury Bond Index, which tracks U.S. government debt, has gained about 1.3% since early July and has increased by approximately 3.9% since the end of April. July will mark the third consecutive month of gains, the longest monthly growth streak since July 2021.

On July 29, U.S. Treasury bond prices generally continued to rise, with the yield on the 10-year U.S. Treasury bond hitting a new low in over a week, signaling the start of this week's super central bank week.

In the coming days, central banks in Japan, the U.S., and the U.K. will announce their monetary policy decisions, and global markets are experiencing the most thrilling 32 hours.

Financial reporter Nick Timiraos writes that a rate cut by the Federal Reserve this week is unlikely. However, with improving inflation and a cooling labor market, coupled with the Fed's risk considerations shifting from concerns about rising inflation to worries about rising unemployment, the Fed is expected to signal a rate cut in September to prepare for it.

Wells Fargo macro strategist Erik Nelson states that market pricing suggests readiness for a rate cut in September, with two rate cuts likely. The larger question for the market is whether there will be six or more rate cuts.

Notably, some traders are even betting on a 50 basis point rate cut by the Fed in September, reflecting concerns about an economic recession. The steepening of the U.S. Treasury yield curve and significant cooling in the labor market support this aggressive market expectation, though economic data released indicates strong U.S. economic performance.

Kate Moore, Chief Strategist for Thematic Investing at BlackRock, notes that Fed officials are now finding it difficult to make decisions, especially before the U.S. elections. BlackRock expects the Fed to cut rates in September, with potentially three cuts this year and another in the first half of next year, as BlackRock anticipates more downward pressure on future inflation.

David Mericle, Chief U.S. Economist at Goldman Sachs Research, expects the statement after this week's Fed meeting to include some revised language, indicating that central bank policymakers feel more comfortable with rate cuts due to favorable data.

Last week, former Fed Vice Chairman and former New York Federal Reserve Bank President Dudley, who had previously advocated for rate hikes in 2019, has now reversed his stance and called for a rate cut this month.

He believes that one reason Fed officials have stated that they will not cut rates this month is due to a misunderstanding of the labor market, and the deterioration in this market will create a self-reinforcing economic feedback loop. Historical experience suggests that when the labor market cools to this extent, it often declines more rapidly, and delaying rate cuts increases the risk of an economic recession.

Some analysts remain cautious about rate cuts. They believe that the U.S. economic fundamentals are strong and there is no need to rush into rate cuts. JPMorgan's report last Friday stated that Fed Chair Powell is expected to avoid holding any specific meetings during the first rate cut, as there is insufficient reason to support a Fed rate cut.