Short-dated U.S. government bond yields sank to three-month lows on Thursday, extending a slide fueled by growing conviction that the Federal Reserve will begin cutting interest rates as soon as its September meeting. The two-year note yielded roughly 3.67% after falling almost 30 basis points in recent sessions, while the five-year note also touched its weakest level since May. The move has steepened segments of the curve that had been deeply inverted. The gap between 30- and five-year Treasuries widened to 109 basis points, the most since 2021, and the 10-year–two-year spread stood at about 0.54%. Futures tied to the federal-funds rate also slipped, reflecting expectations of easier policy following a run of softer economic data. Market calm has accompanied the drop in yields. The ICE BofA MOVE index, which measures implied volatility across the Treasury market, fell to its lowest reading since January 2022—roughly half the level reached after April’s “Liberation Day” sell-off. Equity volatility has eased as well, with the Cboe VIX hovering near 15.