Ekonomické zprávy

US bond yields are showing mixed dynamics

U.S. Treasury yields were mixed, while market participants are cautious ahead of tomorrow's publication of US inflation data, which may affect the prospects for the Fed's monetary policy.

The yield on 5-year Treasury bonds grew by 1.1 basis points, reaching 3.935%, while the yield on 30-year bonds was 3.806% (-2.0 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, increased by 2.8 basis points to 4.541%, while the yield on 10-year bonds fell to 3.734% (-0.9 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 81 basis points.

The overall US consumer price index fell 0.1% in December, and the last month of 2022 marked the third consecutive increase in the core CPI by 0.3% or less. A significant decline in gasoline prices helped to contain overall inflation, but signs of slowing inflation were not limited to prices at gas stations. Grocery store prices rose at the slowest pace since March 2021, and prices for basic goods declined for the third month in a row due to another drop in the cost of used cars. Overall inflation was probably less favorable in January. Experts expect that the CPI increased by 0.4% compared to the previous month. The rise in gasoline prices and the suspension of the downward trend in used car prices are one of the reasons why price growth is expected to accelerate in January compared to December. However, core inflation seems to be still slowing down gradually, and the annual inflation rate is expected to have fallen again. The overall CPI is likely to have increased by 6.2% per annum in January, which will be the weakest pace since October 2021.

The Fed has raised interest rates eight times since March 2022 to curb inflation. But many investors are concerned that the pace of rate hikes could lead the US economy into recession, and hope that the Fed will suspend rate hikes this year. Last week, several Fed officials hinted that rates could rise even higher, but that they would base any policy decisions on economic data. According to the CME FedWatch Tool, markets see a 90.8% chance of the Fed raising interest rates by 25 basis points next month, as well as a 71% chance of a similar move in May.

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