U.S. Treasury bond yields have mostly declined, while market participants expect the release of a lot of U.S. data that will help clarify the state of the economy.
The yield on 5-year Treasury bonds fell by 0.3 basis points, reaching 3.793%, while the yield on 30-year bonds was 4.222% (-0.3 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, fell by 0.5 basis points to 4.048%, while the yield on 10-year bonds rose to 3.944% (+0.2 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 10 basis points.
Amid continuing uncertainty about the state of the US economy, investors expect the publication of new inflation data this week, namely a report on producer prices and consumer prices, as well as statistics on retail sales and industrial production. The inflation data will be watched closely after recent concerns about whether the U.S. economy could enter a recession and whether the Fed should already begin easing monetary policy to avoid a hard landing. According to the CME FedWatch Tool, markets see a 46.5% probability of a 0.5% rate cut in September, and a 48.0% probability of 0.25% rate cut in November.