The yield on US Treasury bonds declined moderately, while market participants followed the news from China, as well as analyzed the statements of Fed policymakers.
The yield on 5-year Treasury bonds fell by 2.7 basis points, reaching 3.865%, while the yield on 30-year bonds was 3.726% (-2.3 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, fell by 3.7 basis points to 4.434%, while the yield on 10-year bonds declined to 3.672% (-3.0 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 76 basis points.
People in China who attended weekend protests against Covid restrictions say they have been contacted by police, as authorities begin clamping down. Several people in Beijing said police had called demanding information about their whereabouts. On Tuesday officials said they would speed up a push to vaccinate older people. Vaccination rates among elderly people are relatively low.
In addition, mainland China reported the first decline in daily Covid infections in more than a week on Monday. The country said local infections, mostly asymptomatic, totaled 38,421, down from a record high of 40,052 reported for Sunday. The last time the daily case count fell from the prior day was on Nov. 19, the data showed.
As for the statements of Fed policymakers, yesterday the president of the Federal Reserve Bank of New York, John Williams, said that the Central Bank should continue to raise rates for now. Lowering rates may be an option for 2024, he added. Meanwhile, president of the Federal Reserve Bank of Cleveland Loretta Mester said that the Fed may slow down the pace of interest rate hikes, but it does not plan to interrupt the process yet.
On Wednesday, Fed Chairman Jerome Powell is due to deliver a report on the prospects for the US economy and the labor market at the Brookings Institution event, which may give more information about the prospects for US monetary policy.
Today, investors will focus on data on US consumer confidence, which will be published at 15:00 GMT. Economists expect the index to decline to 100 points from 102.5 points in October.