U.S. Treasury bond yields have declined markedly, while market participants are preparing for the release of new U.S. economic data. The focus also remains on the minutes of the Fed's November meeting, in which policymakers expressed confidence that inflation is declining and that further interest rate cuts will occur gradually.
The yield on 5-year Treasury bonds fell by 4.5 basis points, reaching 4.135%, while the yield on 30-year bonds was 4.445% (-3.5 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, decreased by 3.7 basis points to 4.217%, while the yield on 10-year bonds fell to 4.261% (-4.1 basis points).
A lot of economic data is expected to be published on Wednesday ahead of Thanksgiving on Thursday when markets will be closed. The key will be personal income and expenditure data for October, as well as the core personal consumption expenditure (PCE) price index (the Fed's preferred inflation indicator). Economists predict that the PCE price index rose 0.2% in October, which will accelerate the annual rate to 2.3% from 2.1% in September. Meanwhile, the core PCE price index is projected to have increased by 0.3% compared to September and by 2.8% per annum. Experts said that stronger than expected data may reduce the likelihood of easing the Fed's monetary policy at the December meeting. According to the CME FedWatch Tool, markets see a 66.5% probability of a 0.25% rate cut in December (compared to 55.7% a week ago).