Home| Features| About| Customer Support| Leave a Review| Request Demo| Our Analysts| Login
Gallery inside!

There is Little Change in Treasury Yields After Inflation Data Barely Shifts Interest Rate Expectations

March 13, 2024
minute read

In the early hours of Wednesday, yields on U.S. government debt experienced a slight increase as traders speculated that inflation data exceeding expectations would not necessarily eliminate the possibility of a Federal Reserve rate cut in June.

The yield on the 2-year Treasury, represented by BX:TMUBMUSD02Y, edged up by 1.3 basis points to reach 4.610%, up from the previous day's 4.597%. Concurrently, the yield on the 10-year Treasury (BX:TMUBMUSD10Y) saw a 2.3 basis points climb to 4.177%, compared to Tuesday's 4.154%. Similarly, the yield on the 30-year Treasury (BX:TMUBMUSD30Y) increased by 3 basis points, settling at 4.341%, up from 4.311% on the preceding day. It's essential to note that yields and prices move inversely.

Market dynamics have been influenced by the release of the consumer price index (CPI) for February on Tuesday, which surpassed expectations. However, the market absorbed this information with minimal impact on yields, and the anticipated timing of a Fed rate cut remained largely unchanged.

Traders are now turning their attention to Thursday's release of the producer price index (PPI) for February, seeking signs of inflationary pressures in the supply chain. Simultaneously, retail sales data on the same day will provide insights into the overall health of the U.S. consumer.

Presently, the market reflects a 99% probability that the Federal Reserve will maintain interest rates within the 5.25% to 5.5% range next Wednesday, according to the CME FedWatch Tool. The likelihood of a 25-basis-point rate cut by June stands at 58.4%, showing little deviation from the period before the CPI report.

Wednesday is relatively quiet in terms of major U.S. economic reports, with the main event being the Treasury's auction of $22 billion worth of 30-year bonds scheduled for 1 p.m. Eastern time.

According to Lara Rhame, chief U.S. economist at FS Investments, the journey back to 2% inflation appears challenging. Reflecting on the pre-COVID economy, Rhame noted a period characterized by consistently low and stable inflation. However, the current scenario presents a different picture, with inflation, wages, and service prices running higher than expected. This incongruence with a swift return to 2% inflation will pose ongoing challenges for the Fed throughout the year. Rhame anticipates two to three carefully executed rate cuts in the second half of the year, emphasizing the need for a meticulous approach rather than a broad policy easing program.

Cathy Hills
Associate Editor
Eric Ng
John Liu
Editorial Board
Bryan Curtis
Adan Harris
Managing Editor
Cathy Hills
Associate Editor

Subscribe to our newsletter!

As a leading independent research provider, TradeAlgo keeps you connected from anywhere.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Related posts.