The yield on US Treasury bonds has declined moderately, while market participants are preparing for the publication of the minutes of the July Fed meeting and the speech of Fed Chairman Powell.
The yield on 5-year Treasury bonds fell by 1.9 basis points, reaching 3.748%, while the yield on 30-year bonds was 4.128% (-2.3 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, fell by 1.7 basis points to 4.049%, while the yield on 10-year bonds fell to 3.871% (-2.1 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 18 basis points.
Recent US economic data has helped ease recent concerns about the state of the US economy, which has given a boost to global stock markets. Markets continue to expect an easing of the Fed's monetary policy in September, but the probability of a 0.5% rate cut has sharply decreased. According to the CME FedWatch Tool, markets see a 28.5% probability of a 0.5% rate cut in September (down from 50% the week before), and a 71.5% probability of a 0.25% rate cut (up from 50.0% the week before). In the coming days are the release of minutes from the Fed’s July meeting minutes, and the Jackson Hole symposium, which kicks off on Thursday. Powell will on Friday deliver a speech at the annual event, which attracts economists, monetary policymakers and academics from around the world. However, experts doubt that Powell will provide any guidance on the size of the rate cut at next month's meeting.