US Treasury bond yields declined moderately, while market participants are preparing for the publication of economic data and the speech of Fed policymakers.
The yield on 5-year Treasury bonds fell by 1.9 basis points, reaching 4.512%, while the yield on 30-year bonds was 4.569% (-0.8 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, fell by 2.4 basis points to 4.929%, while the yield on 10-year bonds decreased to 4.457% (-1.6 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 47 basis points.
Later in the day traders will have an eye on S&P/Case-Shiller home price indices, Conference Board consumer confidence index and speeches from Fed policymakers (Fed Governor Lisa D. Cook and San Francisco Fed President Mary Daly). That will be followed on Friday by the April personal income and expenditures report, which includes a measurement of price movements across a range of consumer expenses. Meanwhile, earlier today, Minneapolis Fed President Neel Kashkari said that the Central Bank should wait for significant progress in combating inflation before lowering interest rates. Asked what conditions are necessary for the Fed to cut rates once or twice this year, Kashkari said: “Many more months of positive inflation data, I think, will give me confidence that it's time to cut rates.” He added that he was confident that the Fed would eventually reach the 2% inflation target, but warned: “I don't see the need to rush and cut rates, I think we need to do everything right.” According to the CME FedWatch Tool, markets see a 10.2% probability of a 25 basis point rate cut at the Fed meeting in July, a 49.4% probability of a rate cut in September, and a 61.7% probability of monetary policy easing in November.