The yield on US Treasury bonds rose moderately, while market participants continue to analyze the statements of Fed policymakers.
The yield on 5-year Treasury bonds rose by 4.1 basis points, reaching 4.11%, while the yield on 30-year bonds was 4.40% (+4.2 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, increased by 3.8 basis points to 4.465%, while the yield on 10-year bonds increased to 4.185% (+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 28 basis points.
Against the background of recent economic data and statements by Fed policymakers, traders increasingly bet on a September interest rate cut, with a reduction in July now seen as highly unlikely. According to the CME FedWatch Tool, markets see a 4.7% probability of a 25 basis point rate cut at the Fed meeting in July, a 96.2% probability of a rate cut in September, and a 98.5% probability of monetary policy easing in November.
Yesterday, Fed Governor Christopher Waller said that a rate cut is close, but stressed that he will closely monitor the data. The president of the Federal Reserve Bank of New York, John Williams, expressed a similar opinion, and the president of the Federal Reserve Bank of Richmond, Thomas Barkin, said that he would "act consciously" when it comes to lowering rates. Earlier this week, Fed Chairman Jerome Powell indicated that rates are likely to be cut before inflation reaches 2%.
Today, the report on initial jobless claims for the past week will be in the focus of investors' attention. Economists forecast that initial jobless claims rose to 235,000 from 222,000 a week earlier.