US Treasury bond yields are showing positive dynamics, while market participants are preparing for the publication of US economic data and continue to analyze statements by Fed policymakers.
The yield on 5-year Treasury bonds increased by 2.3 basis points, reaching 4.524%, while the yield on 30-year bonds was 4.67% (+3.8 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, increased by 0.8 basis points to 4.851%, while the yield on 10-year bonds increased to 4.514% (+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 34 basis points.
Yesterday Boston Fed president Collins said it will take longer "than previously thought" to bring inflation down, becoming the latest policymaker to make it clear that rates need to stay at their current levels. Still, she remains optimistic that inflation can be brought back to the Fed's goal of 2% in a reasonable amount of time and with a job market that remains healthy. Other Fed officials this week have also shown they favor holding rates at current levels for longer. More Fed officials are set to speak on Thursday and Friday.
As for the data, at 12:30 GMT, a weekly report on the initial jobless claims will be released (economists expect an increase to 212 thousand from 208 thousand a week earlier), and tomorrow the Reuters/Michigan consumer sentiment index for May will be published (consensus estimates suggest a decrease in the index to 76.0 from 77.2 in April). Meanwhile, US inflation data will be released next week.