The yield on US Treasury bonds rose slightly, while market participants took a wait-and-see attitude ahead of the publication of US economic data, which may affect the timing of the Fed's interest rate cut.
The yield on 5-year Treasury bonds increased by 1.0 basis points, reaching 4.671%, while the yield on 30-year bonds was 4.726% (+0.2 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, increased by 1.6 basis points to 4.987%, while the yield on 10-year bonds increased to 4.627% (+0.4 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 36 basis points.
Economic data expected this week - the GDP report and the personal consumption expenditures price index - will help assess the state of the economy and may inform Fed policymakers’ thinking ahead of their meeting on April 30-May 1. According to forecasts, GDP growth slowed to 2.5% QoQ from 3.4% QoQ in the 4th quarter, and the core PCE price index rose by 2.6% per annum in March after an increase of 2.8% per annum in February. Experts warn that these data may increase concerns that interest rates will remain high for a long time and that there will be fewer rate cuts this year than previously expected. Fed policymakers have said in recent weeks that they should not rush to lower interest rates, and they need to wait for additional evidence of a weakening economy before moving on to easing policy. According to the CME FedWatch Tool, markets see a 15.3% probability of a 25 basis point rate cut at the Fed meeting in June, and a 39.8% probability of a rate cut in July (compared to 44.7% a week earlier).