US Treasury bond yields are showing negative dynamics, while market participants have taken a wait-and-see attitude ahead of the publication of inflation data and speeches by Fed policymakers, which may shed light on the timing of monetary policy easing.
The yield on 5-year Treasury bonds fell by 2.0 basis points, reaching 4.131%, while the yield on 30-year bonds was 4.37% (-1.1 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, decreased by 1.4 basis points to 4.474%, while the yield on 10-year bonds decreased to 4.17% (-1.7 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 30 basis points.
January data on the US CPI will be published tomorrow. According to forecasts, inflation continued to decline in January - the consumer price index probably increased by 0.2% for the month and by 3% per annum. Also this week, data on producer prices and retail sales will be in focus. Investors are hoping that the data will suggest that the Fed could begin cutting rates sooner rather than later. According to the CME FedWatch Tool, markets see a 17.5% probability of a 25 basis point rate cut at the Fed meeting in March and a 63.3% probability of a rate cut in May, with 115 basis points of cuts priced in for this year.
Meanwhile, later today, Fed Board Governor Michelle Bowman, Federal Reserve Bank of Richmond President Thomas Barkin and Federal Reserve Bank of Minneapolis President Neel Kashkari will deliver speeches.