US Treasury bond yields declined slightly, while market participants are cautious ahead of the publication of important US data that may affect the timing of the Fed's monetary policy easing. The focus was also on the news that U.S. President Biden is set to announce new China tariffs as soon as this week targeting strategic sectors, including a major hike in levies on electric vehicles.
The yield on 5-year Treasury bonds fell by 1.2 basis points, reaching 4.506%, while the yield on 30-year bonds was 4.64% (-0.6 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, decreased by 1.5 basis points to 4.853%, while the yield on 10-year bonds fell to 4.494% (-1.0 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 36 basis points.
The key event of this week will be the publication of the U.S. producer and consumer prices inflation readings, which will further set the tone for the Fed's anticipated rate cuts this year. A series of central bank officials are also expected to speak this week, and investors will be parsing their comments for fresh clues about the path ahead for interest rates. According to the CME FedWatch Tool, markets see a 3.5% probability of a 25 basis point rate cut at the Fed meeting in June, a 25.4% probability of a rate cut in July, and a 61.2% probability of monetary policy easing in September.