The yield on US Treasury bonds has declined markedly, while market participants are cautious ahead of the announcement of the results of the Fed meeting.
The yield on 5-year Treasury bonds fell by 4.8 basis points, reaching 3.418%, while the yield on 30-year bonds was 3.693% (-3.9 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, decreased by 3.9 basis points to 3.941%, while the yield on 10-year bonds fell to 3.399% (-4.0 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 54 basis points.
As for the Fed meeting, investors expect the Central Bank to announce a rate hike by 25 bps. The statement is due to be released at 18:00 GMT, with Chair Jerome Powell scheduled to speak to reporters half an hour later. Investors will be looking for clues as to whether the Fed will keep rates at the same level after this meeting, or continue to tighten monetary policy to combat inflation.
Central banks around the world have been aggressively raising interest rates for more than a year in an attempt to curb high inflation, but economists have warned in recent days that price pressures are likely to remain high for even longer. The WEF Chief Economists Outlook report highlighted that inflation remains a primary concern. Nearly 80% of the chief economists surveyed said central banks face “a choice between managing inflation and maintaining financial sector stability,” while a similar proportion expect central banks to have difficulty meeting their inflation targets.
In addition to the Fed meeting, market participants will also pay attention to data on the US labor market from ADP (economists expect employment growth of 150 thousand in March after an increase of 145 thousand in February), as well as the ISM non-manufacturing index for April (according to forecasts, the index rose to 51.8 from 51.2 in March).