On Monday, Treasury Yields Fell Amid a Lack of Data

Monday morning saw a marginal decrease in rates on U.S. government bonds, with no significant catalysts driving market movement ahead of the forthcoming key inflation update later in the week.

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Key Figures:

• The yield on the 2-year Treasury BX:TMUBMUSD02Y stood at 4.833%, marking a decline of 3.3 basis points from 4.866% on Friday. Yield moves inversely to prices.
• The yield on the 10-year Treasury BX:TMUBMUSD10Y was at 4.468%, down 3.5 basis points from 4.503% on Friday.
• The yield on the 30-year Treasury BX:TMUBMUSD30Y registered at 4.615%, reflecting a decrease of 3 basis points from 4.645% on Friday.

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Market Drivers:Investors are directing their attention towards the inflation data scheduled for release on Wednesday, following unexpected upward movements observed in the first quarter. These surprises have tempered expectations regarding the timing and extent of potential Federal Reserve rate cuts throughout the year.

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Economists surveyed by the Wall Street Journal anticipate the annual headline rate of consumer-price-index inflation to be around 3.4% for April, compared to 3.5% in March. Core readings, excluding food and energy, are projected to land at 0.3% for last month and 3.6% year over year.

No significant data releases are slated for Monday.

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On Tuesday, producer-price data for April will be made public, accompanied by a speech from Fed Chairman Jerome Powell. Wednesday will witness the simultaneous release of the consumer-price index for April and retail-sales data for the same month.

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Analyst Insights:Roman Ziruk, senior market analyst at London-based financial services firm Ebury, highlighted the significance of inflation data in shaping the Federal Reserve's rate cut plans for 2024. Ziruk emphasized the necessity for CPI monthly prints to remain below 0.2% increases, particularly in the core index, in order to align with the interrupted disinflationary trend of 2023. However, economists' expectations suggest that such trends are unlikely to manifest in this week's April CPI report.

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Ziruk cautioned that any further surprises in the upward direction could prompt a substantial reevaluation of the Fed's rate trajectory for the remainder of the year. As a result, he anticipates heightened volatility immediately following the publication of the inflation figures on Wednesday.

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