Market expectations for a Federal Reserve interest rate reduction this year have weakened further, driving the overnight index swap (OIS) rate tied to the December policy meeting up to 3.52%. This indicates that markets are pricing in only 12 basis points of rate cuts, implying approximately a 50% probability of a 25-basis-point cut by year-end.

In the US Treasury cash market, short-term bonds continued their decline, pushing the 2-year yield to a session high with an increase of about 11 basis points during the day.

The current OIS pricing for the December Fed meeting contrasts with the situation at Tuesday's close, when traders had fully priced in a 25-basis-point rate cut for the year. The shift in expectations followed remarks by Fed Chair Jerome Powell after the announcement to keep interest rates unchanged.