US Treasury bond yields have declined moderately, while market participants continue to worry that raising interest rates by major central banks to curb inflation could cause a sharp global slowdown or recession.
The yield on 5-year Treasury bonds decreased by 6.0 basis points, reaching 3.167%, while the yield on 30-year bonds was 3.194% (-4.8 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, fell by 3.5 basis points to 3.021%, while the yield on 10-year bonds fell to 3.106% (-5.0 basis points), and reached its lowest level in almost two weeks.
Investors also continue to analyze yesterday's statements by Fed Chairman Jerome Powell, who noted that the Fed will continue to raise interest rates to reduce inflation. He did not mention the size of future rate increases, but said that their pace would depend on incoming data. Powell also noted that inflation has unexpectedly increased over the past year, and further surprises are possible. According to the Fed chairman, the available data for May suggest that the annual growth of the core PCE price index probably remained at the April level (4.9%) or slightly decreased last month. At the same time, recent data indicate that real GDP growth accelerated this quarter, while consumer spending remains high. However, the tightening of financial conditions observed in recent months should continue to restrain growth and contribute to a better balance of supply and demand, Powell added.
As for the US data, today at 12:30 GMT a report on the number of initial applications for unemployment benefits for the past week will be published (economists expect that the number of applications decreased to 227 thousand from 229 thousand a week earlier), and at 13:45 GMT business activity indices in the manufacturing sector and services sector for June will be released. Consensus estimates suggest that manufacturing PMI declined to 56.0 from 57.0 in May, and services PMI rose to 53.5 from 53.4.