Ekonomické zprávy

US bond yields show mostly positive dynamics

The yield on US Treasury bonds has mostly increased, while market participants are preparing for the publication of the US consumer price index, which may cause a reassessment of the prospects for the Fed's monetary policy.

The yield on 5-year Treasury bonds rose by 0.5 basis points, reaching 3.550%, while the yield on 30-year bonds was 3.632% (+1.1 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, decreased by 0.6 basis points to 4.052%, while the yield on 10-year bonds increased to 3.439% (+0.5 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 61 basis points. Experts note that the yield on 2-year Treasury bonds is below the Fed funds rate, which historically signals that the Central Bank is nearing the end of its rate hike cycle.

The key event of today will be the publication of the US CPI for March (at 12:30 GMT). There were only a few positive changes in the February inflation data. Grocery store prices rose by just 0.3%, which is the smallest increase since March 2021. Used car prices continued to decline and fell by another 2.8% over the month. But despite these improvements, core CPI inflation remained uncomfortably high. With the growth of the core consumer price index by 0.5% in February, year-on-year it rises by more than 5%, regardless of whether it is measured on a 1-month, 3-month or 12-month basis. After the CPI increased by 0.4% in February, prices are expected to increase by 0.2% in March. Given that the initial jump in oil/gasoline prices caused by Russia's invasion of Ukraine has been left behind for a whole year, the consumer price index, measured on an annualized basis, should drop to 5.2% in March from 6.0% in February. Excluding food and energy, it is expected that the consumer price index increased by 0.4% over the month and by 5.6% per annum. Core inflation is likely to slow further as the year progresses, but there are doubts that this will be noticeable in the March CPI report.

Also today, the minutes of the Fed's March meeting will be presented, which may contain fresh clues about the Fed's further actions. According to the CME FedWatch Tool, markets see a 74.4% chance of a 25 basis point rate hike at the Fed's May meeting, up from 43.3% a week earlier.

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