The U.S. 10-Year Treasury yield (TNX) experienced a notable decline, closing at 4.613%, down 4.1 basis points, as market participants reacted to dovish comments from Federal Reserve Governor Waller. According to Morgan Stanley, Waller's remarks that "it is reasonable to think rate cuts could happen in the first half of the year" if inflation data remains favorable, have spurred a rally across the U.S. Treasury curve. The belly of the curve, particularly the 5-year yield, led the rally with a 5 basis point drop. Despite mixed retail sales data, which showed a 0.4% m/m increase in December, the overall economic narrative remains unchanged, supporting the potential for rate cuts. Morgan Stanley analysts highlight that the dovish tone from the Fed could lead to three or four rate cuts this year, contingent on continued positive economic data.