Treasury Yields Rise With Inflation, the Fed in This Week’s Spotlight

On Monday morning, Treasury yields mostly trended higher as investors anticipated the upcoming Federal Reserve meeting and crucial inflation data set to be released later in the week.

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Current Trends
‍The 2-year Treasury yield (BX) remained relatively stable at 4.882%, following a notable 15-basis point increase to 4.87% on Friday. Meanwhile, the 10-year Treasury yield (BX) experienced a rise of 3.4 basis points to 4.462%, after climbing 14.8 basis points to 4.428% at the end of last week.

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The 30-year Treasury yield (BX) also edged up by 4.2 basis points to 4.589%, following an 11.8 basis-point increase to 4.547% on Friday.

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Market InfluencesThis week's economic focus will be on Wednesday's release of the consumer-price index for May, followed by the Federal Reserve's policy announcement in the afternoon. These events are expected to significantly influence market dynamics.

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Fed-funds futures traders have adjusted their expectations regarding a potential quarter-point rate cut from the Federal Reserve by September, with the probability now standing at 46.7%, down from 51.3% a week earlier, according to the CME FedWatch Tool.

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Global ContextIn Europe, France's 10-year government bond yield (BX

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) surged by 11.3 basis points after President Emmanuel Macron announced parliamentary elections following his party's substantial defeat in the European Union elections. Additionally, Belgium's prime minister resigned due to his party's poor performance in the same elections.

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U.S. Treasury Yield MovementsIn the U.S., both the 2-year and 10-year Treasury yields experienced their largest one-day increases since April 10 on Friday. This surge followed the release of employment data revealing that the U.S. economy added a stronger-than-expected 272,000 jobs in May, signaling robust economic activity and influencing investor expectations regarding future Federal Reserve actions.

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Overall, the movement in Treasury yields reflects a combination of domestic economic indicators and global political events, shaping investor sentiment and market strategies ahead of significant economic reports and policy decisions.

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