The yield on US Treasury bonds rose moderately, while market participants are preparing for the release of new US statistical data that will help clarify the trajectory of the Fed's interest rates.
The yield on 5-year Treasury bonds rose by 2.7 basis points, reaching 3.869%, while the yield on 30-year bonds was 4.325% (+2.6 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, increased by 2.0 basis points to 3.955%, while the yield on 10-year bonds rose to 4.042% (+2.6 basis points).
As for the US data, the retail sales report for September, weekly statistics on initial jobless claims, industrial production data for September, as well as the NAHB housing market index for October will be published today. Investors will be parsing through the reports for hints about the state of the U.S. economy and the health of the consumer. Retail sales unexpectedly increased in August - by 0.1% m/m, compared with expectations of a 0.2% decline. However, the latest change was almost entirely driven by growth in the e-commerce sector (+1.4% m/m). In addition to out-of-store sales, the data pointed to widespread weakness in consumer spending at the end of the summer. However, the August retail sales report points to a more discerning consumer rather than one who has completely exhausted his options. On an annualized basis, total retail sales increased by 2.5% in August - this, of course, is not a signal of a sharp reduction in costs, but still a noticeable step back compared with an increase of 3.5% per annum in August last year. Experts predict that retail sales continued to grow at a moderate pace in September. Overall, the revisions included in the personal income and expenditure data for September showed that the consumer is in a stronger position than previously thought. According to forecasts, retail sales increased by 0.3% in September after an increase of 0.1% in August.
Earlier this week, several Fed officials hinted at further rate cuts to come. Additional comments from policymakers are expected as the week continues. According to the CME FedWatch Tool, markets see a 92.1% probability of a 0.25% rate cut at the November meeting (compared to 83.3% a week earlier) and a 84.3% probability of a 0.25% rate cut in December (compared to 78.9% a week earlier), with a 0.46% rate cut expected by the end of the year.