The yield on US Treasury bonds has declined moderately, while market participants are preparing for the publication of a lot of US data that will help clarify the state of the economy.
The yield on 5-year Treasury bonds fell by 2.3 basis points, reaching 3.98%, while the yield on 30-year bonds was 3.775% (-2.6 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, decreased by 1.7 basis points to 4.605%, while the yield on 10-year bonds fell to 3.736% (-2.5 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 87 basis points.
As for the data, a report on US retail sales for January will be presented at 13:30 GMT. The December report was weaker than forecasts. Total retail sales fell 1.1% over the month. Some decrease may be due to the fall in consumer prices in December (retail sales are a nominal indicator). Nevertheless, according to experts, real retail sales remained unchanged in December. Excluding cars and gas stations, nominal sales still fell by 0.7% in December, with a decline recorded in 10 of the 13 categories. Nevertheless, experts expect to see glimpses of positive activity in the retail sales report for January. More subdued inflation helps to increase real spending due to stronger growth in real incomes. Real disposable personal income grew for six months in a row, until December, and provides some support to consumer purchasing power. Apparently, this has manifested itself to some extent in the revival of purchases of durable goods. Separately published data showed that car sales in January were at the highest monthly level since May 2021. This should support the overall growth rate - experts expect that total retail sales increased by 1.8%. Excluding cars, retail sales are expected to have increased by 0.8%.
In addition, industrial production data for January will be released at 14:15 GMT, and the NAHB housing market index for February will be presented at 15:00 GMT. Investors also follow the statements of Fed policymakers in an attempt to get new clues about the prospects for monetary policy. Many investors are concerned about whether a rate hike could lead to a contraction of the U.S. economy, and hope that the central bank will suspend raising rates this year.