U.S. Treasury bond yields mostly declined, while investors continued to analyze the minutes of the January Fed meeting, and also prepared for the publication of U.S. data.
The yield on 5-year Treasury bonds fell by 0.5 basis points, reaching 4.294%, while the yield on 30-year bonds was 4.468% (-2.4 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, rose by 0.9 basis points to 4.662%, while the yield on 10-year bonds fell to 4.307% (-1.6 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 36 basis points.
The minutes of the Fed's January meeting, released yesterday, showed that most officials remain wary of cutting interest rates "too quickly." The meeting participants acknowledged that the risks to achieving the Fed's employment and inflation goals are in better balance, but they are still very attentive to inflation risks. Most of the participants in the meeting subsequently stressed the risks of a "too rapid" transition to lower interest rates and pointed out the importance of a thorough assessment of incoming data to determine whether inflation is steadily declining towards the Fed's 2% target. Meanwhile, several participants in the meeting pointed to the risks of economic deterioration associated with maintaining an overly restrictive position for too long. The next Fed meeting is scheduled for March 19-20, and experts expect the central bank to leave rates unchanged again. According to the CME FedWatch Tool, markets see a 28.9% probability of a 25 basis point rate cut at the Fed meeting in May, and a 71.6% probability of a rate cut in June, with approximately 90 basis points of cuts priced in for this year.
As for the data, today investors will focus on the report on initial jobless claims, PMI data, and statistics on the housing market. According to forecasts, initial jobless claims rose to 217 thousand last week from 212 thousand a week earlier. Consensus estimates also suggest that in February, the manufacturing PMI fell to 50.5 from 50.7 in January, and the services PMI fell to 52.0 from 52.5. Meanwhile, existing home sales, according to forecasts, rose in January to 3.97 million from 3.78 million in December, and recorded the sharpest increase since August 2023.