Treasury yields ticked up slightly on Monday as investors turned their attention to key inflation reports scheduled later in the week. Following a stretch of economic data that came in weaker than anticipated, the market is carefully watching for signals about the U.S. economy’s trajectory.
On Monday, the yield on the 10-year Treasury rose by less than one basis point, settling at 3.712%, while the 2-year Treasury yield increased by around two basis points to 3.671%. To provide context, a basis point represents 0.01%, and yields and bond prices generally move in opposite directions.
The US Treasury yield curve has a long history of raising alarms among investors and economists. That’s mostly because when it’s flipped upside down from its usual upward slope in what’s called an inversion, traders start getting an https://t.co/v1PcODe1q8 pic.twitter.com/ZPRwuarAoR
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Here’s a snapshot of recent Treasury yields:
1-Month Treasury: 5.14% (-0.011)
3-Month Treasury: 5.035% (-0.021)
6-Month Treasury: 4.729% (+0.004)
1-Year Treasury: 4.13% (+0.019)
2-Year Treasury: 3.667% (+0.017)
10-Year Treasury: 3.704% (-0.006)
30-Year Treasury: 4.002% (-0.018)
Investors are keeping an eye on the release of the consumer price index (CPI) on Wednesday, followed by the producer price index (PPI) on Thursday. These reports could provide more insight into inflation trends, which remain a key concern for policymakers and financial markets.
In the first week of September, Treasury yields dropped in response to disappointing labor market data. Both nonfarm payrolls and private payrolls came in below expectations, prompting renewed concerns about a potential economic slowdown. Despite the dip in unemployment to 4.2%, as anticipated, the weak jobs data revived speculation about future Federal Reserve policy moves.
S&P 500
An un-inversion in the 2s10s US Treasury yield curve can suggest a positive outlook for US stocks, if a recession is avoided
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— Partystocker (@partystocker) September 9, 2024
Looking ahead, the Federal Reserve is scheduled to hold its next policy meeting on September 18. As of Monday, market participants were pricing in a 71% chance of a 25-basis-point rate cut and a 29% chance of a 50-basis-point cut, based on data from the CME Group’s FedWatch Tool. The likelihood of the larger cut had risen to nearly 50-50 after last week’s data failed to meet expectations, contributing to a slide in stock market performance.
Key Points:
i. Treasury yields slightly increased on Monday, with the 10-year Treasury yield rising to 3.712% and the 2-year Treasury yield reaching 3.671%.
ii. The 1-month and 3-month Treasury yields decreased slightly, while the 6-month and 1-year yields rose.
iii. Key inflation data, including the consumer price index (CPI) and producer price index (PPI), are expected later this week, with markets closely monitoring the results.
iv. Treasury yields dropped earlier in September after disappointing jobs reports stoked concerns about the U.S. economy’s health.
v. Market odds favor a 25-basis-point rate cut by the Federal Reserve in their upcoming September 18 meeting, though the chances of a larger 50-basis-point cut have been increasing.
Susan Guglielmo – Reprinted with permission of Whatfinger News
