US Treasury bond yields have risen markedly, while investors are preparing for the publication of new statistical data and a speech by Fed policymakers, which may provide clues about the pace of further monetary policy easing.
The yield on 5-year Treasury bonds rose by 4.5 basis points, reaching 3.541%, while the yield on 30-year bonds was 4.14% (+5.8 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, rose by 2.7 basis points to 3.603%, while the yield on 10-year bonds rose to 3.794% (+5.6 basis points).
After the Fed began its monetary easing cycle with a big interest rate cut, investors are now wondering if the Fed's recent actions were good news for the U.S. economy or a sign that it is weakening more than previously thought. Yesterday, the Minneapolis Fed President Neel Kashkari called the rate cut "the right decision," and the Federal Reserve Bank of Chicago President Austan Goolsbee said he expects "even more rate cuts over the next year." The president of the Atlanta Federal Reserve, Rafael Bostic, said that the Fed is not in a "mad rush" to a neutral interest rate, as policymakers discuss how much and quickly rates should decrease.
According to the CME FedWatch Tool, markets see a 50.9% probability of a 0.25% rate cut at the November meeting and a 50% probability of a 0.50% rate cut in December, with a 0.73% rate cut expected by the end of the year.
Investors are set to closely monitor further comments from Fed officials - Fed Governor Michelle Bowman and Fed Governor Adriana Kugler will speak later today. Economic data will also be in focus: at 13:00 GMT, the S&P/Case-Shiller home price indices for July will be presented, and at 14:00 GMT, the consumer confidence index for September. Economists predict that home price indices rose by 5.9% per annum after an increase of 6.5% per annum in June, and the consumer confidence index fell to 102.9 from 103.3 in August.