U.S. Treasury bond yields rose moderately, while economic data remained the focus of investors' attention.
The yield on 5-year Treasury bonds increased by 1.6 basis points, reaching 4.368%, while the yield on 30-year bonds was 4.487% (+0.3 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, increased by 1.7 basis points to 4.787%, while the yield on 10-year bonds increased to 4.345% (+0.9 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 44 basis points.
Yesterday's weaker-than-expected JOLTS job openings report raised hopes that the labor market may have eased enough for the Fed to consider cutting interest rates. The state of the labor market is a key factor in central bank decision-making when it comes to monetary policy. Employment data from ADP, as well as services PMI's, will be presented later today. Economists expect that in May the number of employed rose by 180 thousand after an increase of 192 thousand in April. In addition, the S&P Global Services PMI is forecast to rise to 54.8 in May from 51.3 in April, and the ISM Non-Manufacturing index increased to 50.5 from 49.4. These data will allow for a better assessment of the current state of the economy. According to the CME FedWatch Tool, markets see a 16.5% probability of a 25 basis point rate cut at the Fed meeting in July, a 64.9% probability of a rate cut in September, and a 76.4% probability of monetary policy easing in November.