The yield on US Treasury bonds has declined moderately, while market participants are cautious ahead of the publication of many important US data.
The yield on 5-year Treasury bonds fell by 2.5 basis points, reaching 4.047%, while the yield on 30-year bonds was 4.32% (-3.4 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, decreased by 0.8 basis points to 4.40%, while the yield on 10-year bonds fell to 4.115% (-3.1 basis points). The curve between the 10-year Treasury yield and the 2-year yield remains inverted, sending a warning that the economy may be falling or has already fallen into recession. Now the gap between 10 and 2 year U.S. debt is 29 basis points.
Markets continue to try to gauge when the Fed will begin easing monetary policy, which will be a key determinant of the trajectory of the economy and markets this year. Later this week, the PMI data for January, the GDP report for the 4th quarter and personal income and spending data for December will be presented. Households continued to spend money in November as real personal spending increased by 0.2% over the month. The increase in spending in November was accompanied by an increase in real disposable personal income by 0.4%, which was the sharpest increase in eight months. Although the labor market is showing signs of slowing down, consumers are benefiting from rising real wages, which in turn increases costs. Consumers' reliance on loans also helps support spending. However, the increase in delinquencies on credit cards and car loans raises some doubts about how long households will be able to continue to rely on loans. Overall, both the overall and core PCE are expected to have increased by 0.2% over the month, which, if it happens, would be a slight acceleration compared to November. Experts also predict that personal income increased by 0.3% in December, slowing down compared to November (+0.4%), and personal spending rose by 0.4% after an increase of 0.2% in November.