The yield on US Treasury bonds rose moderately, while market participants are preparing for the publication of new US economic data.
The yield on 5-year Treasury bonds increased by 4.1 basis points, reaching 4.275%, while the yield on 30-year bonds was 4.382% (+2.8 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, rose by 3.5 basis points to 4.739%, while the yield on 10-year bonds increased to 4.254% (+3.7 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 49 basis points.
As for economic statistics, data on initial jobless claims, housing starts and building permits will be published today at 12:30 GMT. Economists expect that in May building permits rose to 1.45 million from 1.44 million in April, while housing starts increased to 1.37 million from 1.36. Consensus estimates also suggest that last week initial jobless claims fell to 235 thousand from 242 thousand a week earlier. Last week’s data showed a moderation in the labor market and price pressures, followed up with soft retail sales data on Tuesday, suggesting that economic activity remained lackluster in the second quarter. According to the CME FedWatch Tool, markets see a 10.3% probability of a 25 basis point rate cut at the Fed meeting in July, a 65.9% probability of a rate cut in September, and a 78.2% probability of monetary policy easing in November.