US Treasury bond yields rose moderately, while market participants took a wait-and-see attitude ahead of the Fed's two-day meeting.
The yield on 5-year Treasury bonds grew by 2.2 basis points, reaching 3.643%, while the yield on 30-year bonds was 3.651% (+1.7 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, increased by 2.1 basis points to 4.228%, while the yield on 10-year bonds increased to 3.537% (+1.9 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 69 basis points.
The U.S. Commerce Department said Friday that households cut spending by 0.2% in December from the previous month, confirming a slowdown in economic growth in the world's largest economy, while growth in the core PCE price index - the Federal Reserve's preferred measure of inflation - slowed to 4.4%, reaching its lowest level since October 2021.
As for the Fed meeting, investors expect a slowdown in inflation to prompt policymakers to raise interest rates at a slower pace. According to FedWatch CME Group, markets expect the Fed to raise interest rates by only 25 basis points at its February meeting: the probability of such a move is estimated at 97.9%.
In addition to the Fed meeting, this week market participants will also focus on a lot of US data: ADP employment report, consumer confidence index, JOLTS job openings report, ISM manufacturing index and ISM non-manufacturing index, as well as nonfarm payrolls report.