The yield on US Treasury bonds declined moderately, while market participants continue to analyze yesterday's statements by the head of the Fed and prepare for the publication of new data that will help clarify the prospects for interest rates.
The yield on 5-year Treasury bonds fell by 5.1 basis points, reaching 3.526%, while the yield on 30-year bonds was 4.079% (-5.4 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, decreased by 3.6 basis points to 3.615%, while the yield on 10-year bonds fell to 3.747% (-5.5 basis points).
Yesterday, Fed Chairman Powell said that if economic data remained consistent, the Fed could cut the interest rate two more times, but by 0.25%. Powell also said that the Fed's September decision should not be taken as a sign that the Central Bank will continue to aggressively cut rates. The Fed Chairman also added that policy decisions would continue to be taken on a meeting my meeting basis. According to the CME FedWatch Tool, markets see a 34.7% probability of a 0.50% rate cut at the November meeting (down from 58.2% a week earlier) and a 48.4% probability of a 0.25% rate cut in December (compared to 48.9% a week earlier), with a 0.7% rate cut expected by the end of the year.
As for the data, the S&P Global Manufacturing PMI, ISM Manufacturing PMI, and job openings and labor turnover survey (JOLTS) will be published later today. According to forecasts, the S&P Global manufacturing PMI fell to 47.0 in September from 47.9 in August, the ISM manufacturing PMI rose to 47.5 from 47.2 in August, while job openings fell to 7.67 million in August from 7.673 million in July. However, the key event of this week will be the publication of the nonfarm payrolls report for September (on Friday). Economists expect nonfarm payrolls to rise by 140,000. That’s similar to the August increase and would leave three-month average job growth near its weakest since mid-2019.