On Monday morning, Treasury yields showed a broad increase, primarily led by the 5- to 10-year rates, as investors awaited information about the U.S. government's borrowing needs for the fourth quarter.
Here's the current situation:
The driving factors behind these market movements are as follows:
Market expectations indicate a 98.2% probability that the Federal Reserve will keep interest rates steady within the 5.25%-5.5% range on Wednesday. The likelihood of a 25-basis-point rate increase to a range of 5.5%-5.75% by December stands at 24.5%, but this may change based on Federal Reserve Chair Jerome Powell's statements during his post-meeting press conference.
Furthermore, the Bank of England is anticipated to leave its rates unchanged on Thursday, and Friday will bring the U.S. nonfarm payrolls report for October.
Analysts from BMO Capital Markets emphasize the significance of this week in the Treasury market due to various factors, including financing estimates, refunding announcements, the Federal Open Market Committee (FOMC) decision, and the payrolls report. Additionally, they mention the upcoming update from the Bank of Japan, with expectations of a shift toward a less accommodating policy stance, particularly regarding yield curve control. The impact on U.S. rates will depend on whether this move by the Bank of Japan will push 10-year yields back toward 5.0% or be seen as a reason to buy bonds.
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