The yield on US Treasury bonds rose slightly, while market participants took a wait-and-see attitude ahead of the publication of statistical data and a speech by Fed Chairman Powell, which may provide clues about the further actions of the Central Bank.
The yield on 5-year Treasury bonds increased by 2.1 basis points, reaching 4.18%, while the yield on 30-year bonds was 4.351% (+2.4 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, increased by 1.9 basis points to 4.556%, while the yield on 10-year bonds rose to 4.205% (+2.3 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 35 basis points.
Recent US economic data pointed to a somewhat mixed picture and made it more difficult to predict the timing of the Fed's monetary policy easing. Many investors are hoping for a rate cut and see data indicating a cooling economy as an encouraging sign, while signals of persistent inflation are seen as a sign that a rate cut is still far away. Later this week, many reports on the labor market will be presented, but nonfarm payrolls data for February will be key. The pace of hiring remains strong, and experts expect that employment increased by 190 thousand in January. In addition, the unemployment rate is expected to remain unchanged, and the growth of average hourly earnings slowed to 0.2% amid normalization of supply and demand for workers.
In addition, this week Fed Chairman Jerome Powell is also expected to provide testimony about monetary policy to the House of Representatives and to the Senate. Investors hope that his statements will help clarify the prospects for the Fed's monetary policy. According to the CME FedWatch Tool, markets see a 22.5% probability of a 25 basis point rate cut at the Fed meeting in May, and a 73.2% probability of a rate cut in June.