The yield on US Treasury bonds has declined markedly, while market participants are preparing for the release of a new batch of US data that may affect the prospects for the Fed's monetary policy.
The yield on 5-year Treasury bonds fell by 4.6 basis points, reaching 3.993%, while the yield on 30-year bonds was 3.831% (-2.1 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, decreased by 0.4 basis points to 4.587%, while the yield on 10-year bonds fell to 3.776% (-3.1 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.
As for the US data, a report on the producer price index for January will be released at 13:30 GMT, while consensus estimates suggest that price growth has slowed to 5.4% per annum from 6.2% per annum in December. Also at 13:30 GMT, data on the number of initial applications for unemployment benefits for the past week will be published. Economists expect an increase in the initial jobless claims by 200 thousand after an increase of 196 thousand a week earlier. In general, the US data presented recently indicated that the economy remains strong. In recent weeks, various Fed officials have indicated that the Fed will base future decisions on economic data. Today, investors will continue to analyze the statements of Fed policymakers to get hints on the policy outlook. Taken within the context of the shockingly strong January employment report and still sizzling CPI data, the market is pricing in higher-for-longer Fed rates, now projected to peak at 5.25% and ending 2023 at 5.06%.