US Treasury bond yields have declined moderately, while market participants continue to analyze various data in an attempt to clarify the prospects for the US economy.
The yield on 5-year Treasury bonds fell by 2.1 basis points, reaching 3.561%, while the yield on 30-year bonds was 3.59% (-3.1 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, decreased by 0.1 basis points to 4.152%, while the yield on 10-year bonds fell to 3.438% (-2.9 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 71 basis points.
Now, the focus of traders' attention is shifting to preliminary data on US GDP for the fourth quarter, which will be presented tomorrow. The consensus forecast assumes a slowdown in economic growth to 2.6% from 3.2% in the third quarter. Meanwhile, the report on personal income and expenses for December will be released on Friday, as well as the personal consumption price index (PCE) - one of the Fed's preferred inflation indicators. Economists expect that the PCE price index ex food, energy increased by 4.4% per annum after an increase of 4.7% per annum in November. Overall, investors expect a slowdown in inflation to prompt Fed policymakers to raise interest rates at a slower pace.
In addition to economic data, corporate earnings is also important for investors, as it helps to assess the current state of companies and their opinion about the prospects for activity. This week, such technology giants as IBM (IBM), Tesla (TSLA) and Intel (INTC) will publish their results for the fourth quarter. According to Refinitiv, analysts predict that the total profit of S&P 500 companies will fall by 2.9% YoY in the fourth quarter, to $443.4 billion. Excluding the volatile energy sector, Wall Street estimates profits will fall by 7.3%.