In a week of significant market movement, Treasury yields plunged to multi-month lows as investors anticipated possible rate cuts by the Federal Reserve in the coming year. The yield on the 10-year Treasury note slipped below the 4% level for the first time since August, reaching its lowest point since July.

On Friday, the 10-year Treasury yield was down by 2 basis points at 3.905%, reflecting a downward trend throughout the week. Conversely, the 2-year Treasury yield experienced an increase of 5.2 basis points, reaching 4.45%, nearing the closely observed 4.5% level. These shifts in yields serve as a key indicator of market sentiment and expectations for future monetary policy.

The Federal Reserve, in its latest meeting, hinted at the possibility of three interest rate cuts next year, causing Treasury yields to spiral downwards. During the meeting, the central bank decided to keep interest rates unchanged for the third time consecutively, signaling the potential end of its rate-hiking cycle.

Furthermore, the Fed acknowledged that inflation had cooled over the past year but remarked that prices remained somewhat "elevated." This sentiment was echoed in earlier reports which indicated a slight decline in both the consumer price index and the producer price index for November, suggesting a reduction in inflationary pressures.

However, New York Fed President John Williams, in an interview with CNBC on Friday, seemed to dampen expectations about imminent rate cuts. He stated, "We aren't really talking about rate cuts right now." Williams' comments injected a degree of uncertainty into the market, muddying the waters surrounding future monetary policy decisions.

Investors have been closely monitoring Treasury yields in light of the Fed's hints at rate cuts. The drop in yields indicates a growing belief in the market that the central bank will prioritize supporting the economy over fighting inflationary pressures. As yields and prices move inversely, the declining yields have bolstered bond prices and increased demand for Treasury securities.

The week started with the 10-year Treasury trading near 4.22%, bringing into sharp focus the significant drop below the 4% threshold. The sustained downward trajectory of Treasury yields this week has sparked speculation among investors and analysts about the potential impact on other asset classes and the broader market.

As the uncertainty surrounding the future of monetary policy persists, market participants will continue to closely monitor any new developments in order to position themselves accordingly.