Futures markets are also expecting a rate cut. Investors peg the chances of a quarter-point interest rate cut at nearly 96%, according to the CME FedWatch Tool, a measure of market sentiment.

Short-term U.S. government bonds are underperforming longer-duration Treasurys after San Francisco Fed President Mary Daly pushed back against the need for an interest-rate cut of 50 basis points at the Federal Reserve's September meeting.

Traders ramped up Fed rate cut bets on Thursday, pinning the dollar near multi-week lows, while a global stock rally paused as investors awaited data on U.S. producer prices later in the day that may show how tariffs are impacting inflation trends.