Bond Yields Are Mixed as CPI Data Take Precedence Over an Uncertain Jobs Report

Rates on U.S. government bonds experienced minimal changes to a slight increase on Monday morning as investors eagerly anticipated crucial inflation data scheduled for later in the week, which holds the potential to reshape expectations regarding interest rates.

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Here's the breakdown of the current Treasury yields:

• The yield on the 2-year Treasury (BX:TMUBMUSD02Y) stood at 4.517%, marking a 3.3 basis points increase from Friday's 4.484%. (Yields move inversely to prices.)
• The yield on the 10-year Treasury (BX:TMUBMUSD10Y) remained unchanged at 4.088%, holding steady from its level at 3 p.m. Eastern time on the previous Friday.
• The yield on the 30-year Treasury (BX:TMUBMUSD30Y) was at 4.256%, registering a marginal decrease of less than 1 basis point from Friday's 4.261%.

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Market movements on Monday reflected a mix in yields, influenced by Friday's data revealing a surprisingly robust job creation figure of 275,000 in February. However, this positive news was accompanied by weaker-than-anticipated wage growth and an uptick in the unemployment rate.

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Investors are now turning their attention to Tuesday's consumer-price report, with economists forecasting a 0.4% increase in consumer prices or a 0.3% rise when excluding food and energy. Analysts suggest that if the inflation report surpasses expectations, it could potentially push back the anticipated timing of the Federal Reserve's first interest-rate cut.

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Additionally, on Monday at 1 p.m. Eastern time, there is a scheduled auction of $56 billion worth of 3-year notes.

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Economists, including Brett Ryan, Justin Weidner, and others at Deutsche Bank, emphasized the significance of this week's inflation data in shaping the context for the Federal Open Market Committee (FOMC) meeting scheduled for the following week. The data will provide essential information for monetary policymakers to inform their forecasts for the Fed's Summary of Economic Projections (SEP).

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In their note, the economists highlighted, "If the inflation data evolve as we anticipate, we would expect minimal revisions to the SEP. However, as we recently outlined, alternative economic scenarios could question the timing and pace of rate cuts." The focus on inflation data remains pivotal in determining the trajectory of monetary policy decisions and the potential impact on interest rates.

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