US bond yields have mostly declined, while investors are preparing for the publication of a new batch of US data and a speech by Fed policymakers.
The yield on 5-year Treasury bonds fell by 0.6 basis points, reaching 4.265%, while the yield on 30-year bonds was 4.371% (-0.7 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, rose by 1.1 basis points to 4.745%, while the yield on 10-year bonds fell to 4.242% (-0.6 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 50 basis points.
Although the chances of a rate cut in the summer seem low, investors are looking for hints on whether the Fed may move to cut rates in September. First-quarter U.S. GDP estimates are due on Thursday and the personal consumption expenditures (PCE) price index report on Friday. Meanwhile, the consumer confidence index from the Conference Board will be presented today, while statistics on consumer inflation expectations will attract special attention. Economists expect the consumer confidence index to fall to 100 points in June from 102 points in May.
Various Fed officials are also set to make remarks on Tuesday and throughout the week. These comments may contain clues about the current state of the economy and the Fed's next actions. 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 67.7% probability of a rate cut in September, and a 79.8% probability of monetary policy easing in November.