The yield of US Treasury bonds remained almost unchanged, while market participants analyzed the latest data on the US services sector, and were also preparing for the publication of a report on the US labor market.
The yield on 5-year Treasury bonds fell by 1.4 basis points, reaching 2.858%, while the yield on 30-year bonds was 2.976% (-0.1 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, decreased by 0.2 basis points to 3.106%, while the yield on 10-year bonds fell to 2.734% (-1.4 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 37 basis points.
However, fears of a recession eased after the Institute for Supply Management reported yesterday that the growth of the US services sector unexpectedly accelerated in July amid a strong increase in orders, while supply problems and price pressures eased. According to the report, the index of business activity in the non-manufacturing sector rose to 56.7 from 55.3 in June. This growth put an end to three consecutive monthly declines. Economists predicted a decline in the index to 53.5. A reading above 50 indicates the expansion of the services sector, which accounts for more than two-thirds of U.S. economic activity.
One of the key events of this week will be the publication of the monthly US employment report (on Friday), which will be carefully studied for its likely impact on the Fed's rate hike plans.
As for today's US data, at 12:30 GMT, a report on the trade balance for June will be published (economists expect a reduction in the deficit to $80.1 billion from $85.5 billion in May), as well as data on the number of initial applications for unemployment benefits for the past week (consensus estimates suggest an increase to 259 thousand from 256 thousand a week earlier).