The yield on US Treasury bonds has declined moderately, while market participants continue to assess economic data and their impact on the prospects for the Fed's monetary policy.
The yield on 5-year Treasury bonds fell by 4.5 basis points, reaching 4.578%, while the yield on 30-year bonds was 4.636% (-2.6 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, decreased by 4.3 basis points to 4.918%, while the yield on 10-year bonds fell to 4.536% (-4.0 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 38 basis points.
Yesterday's statistics slightly eased investors' concerns about continued inflationary pressures in the United States. However, there is still uncertainty about the timing of the Fed's monetary policy easing. In recent days, market expectations for when the first rate cut will take place shifted from June to September, while some investors are also considering the possibility of there being no rate cuts at all this year. Fed policymakers have repeatedly stated that rate decisions will be based on data and it is necessary to wait for additional signs of lower inflation before easing monetary policy. According to the CME FedWatch Tool, markets see a 24.2% probability of a 25 basis point rate cut at the Fed meeting in June, and a 49.3% probability of a rate cut in July (compared to 72.6% a week earlier). In addition, the markets now forecast a rate cut of only 40 basis points in 2024, which implies approximately two rate cuts of 0.25%, compared with three cuts predicted just a month ago.
Today, investors will focus on data on import prices, as well as a report on consumer sentiment. According to forecasts, the import price index rose 0.3% m/m in March, as in February, while the Reuters/Michigan consumer sentiment index fell to 79.0 points in April from 79.4 points in March.