The yield on US Treasury bonds declined moderately, as market participants continue to evaluate yesterday's statements by Fed policymakers. Investors are also preparing for the publication of US economic data, which may provide new clues about the current state of the economy.
The yield on 5-year Treasury bonds fell by 5.8 basis points, reaching 4.101%, while the yield on 30-year bonds was 3.690% (-0.7 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, declined by 2.7 basis points to 4.283% after rising to a new 15-year high yesterday, while the yield on 10-year bonds fell to 3.848% (-3.2 basis points), retreating from the highest level since 2010. 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 44 basis points.
Economists note that yesterday's statements by Boston Fed President Susan Collins, Atlanta Fed President Rafael Bostic and Cleveland Fed President Loretta Mester signaled that the Fed will continue to prioritize the fight against inflation, while aggressive and proactive actions are not excluded. Chicago Fed President Charles Evans and St. Louis Fed President Jim Bullard are scheduled to speak later today. The CME FedWatch Tool shows that markets expect further significant rate hikes in the future: the probability of another 75 basis point hike in November is estimated at 69.7%.
As for today's US data, at 12:30 GMT, a report on durable goods orders for August will be published (economists expect a decrease of 0.4% compared to July), and at 14:00 GMT data on new home sales for August (consensus estimates suggest a decrease to 0.5 million from 0.511 million in July) and the consumer confidence index for September will be released (forecasts suggest an increase to 104.5 from 103.2 in August).