(Bloomberg) -- Treasuries headed for their biggest advance in more than a week as traders bet on a period of monetary loosening after the Federal Reserve’s interest-rate cut.

The yield on US 10-year debt dropped four basis points to 4.05%, while its more rate-sensitive two-year peer fell to 3.52%.

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Treasuries had initially fluctuated after Wednesday’s 25 basis-point reduction: after climbing in the wake of the decision, they went into retreat as Fed Chair Jerome Powell signaled he wouldn’t abandon his cautious approach.

Now, those concerns appear to be abating as investors bet on deeper easing ahead, with bonds once more on the rise.

“More cuts are coming, we expect more by the end of the year, we think inflation will ultimately prove temporary,” Nicola Mai, sovereign credit analyst at Pacific Investment Management Co. said in an interview with Bloomberg TV. “We like bonds here.”

Swaps imply around an 80% chance that the Fed will cut by another quarter-point next month and then again in December. In total, 120 basis points of easing is priced by the end of 2026, significantly more than the three cuts indicated by the Fed’s latest dot plot.

While policymakers slightly upgraded their growth and inflation forecasts for 2026, the move is an acknowledgment that downside risks to the economy are growing.

Attention is turning to initial jobless claims numbers, due at 8:30 a.m. New York time, which are expected to show a decrease to 240,000 from last week’s near four-year high, according to a Bloomberg survey of economists.

Still, Jean Boivin, Head of the BlackRock Investment Institute, said the rate reductions might not be as aggressive as some are hoping.

“We think it is notable that only one voting member of the FOMC favored a larger 50-basis point cut and that previous dissenters voted for the majority,” he said.

--With assistance from Alice Gledhill.

(Updates with investor comment.)

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