US Treasury bond yields are showing negative dynamics, while investors have taken a wait-and-see attitude ahead of the release of important US data.
The yield on 5-year Treasury bonds fell by 1.4 basis points, reaching 4.13%, while the yield on 30-year bonds was 4.479% (-2.0 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, decreased by 1.0 basis points to 4.431%, while the yield on 10-year bonds fell to 4.238% (-1.7 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 19 basis points.
Economic figures that beat expectations on Thursday failed to stem concerns, and traders are now awaiting monthly PCE statistics, the last big data point before next week’s Federal Reserve meeting. Economists expect the PCE price index to rise 2.5% year-on-year and 0.1% month-on-month in June, while the core PCE price index also rose by 2.5% and 0.1%, respectively.
As for the Fed's July meeting, market participants expect rates to remain unchanged, but hope that policymakers will shed light on when rates will be lowered and how many rate cuts there will be this year. According to the CME FedWatch Tool, markets see a 100% probability of a rate cut in September, and a 100% probability of monetary policy easing in November.