By Overview
Treasury yields experienced mixed movement early on Thursday, as investors awaited the release of weekly jobless benefit claims data and a scheduled $25 billion auction of 30-year Treasury bonds.
Yield Statistics
- The yield on the 2-year Treasury BX:TMUBMUSD02Y dropped by 1.7 basis points to 4.429%. It is important to note that yields move in the opposite direction to prices.
- On the other hand, the yield on the 10-year Treasury BX:TMUBMUSD10Y rose by 2 basis points to 4.116%.
- Lastly, the yield on the 30-year Treasury BX:TMUBMUSD30Y witnessed a slight increase of less than 1 basis point, reaching 4.337%.
Market Drivers
The stabilization of ten-year Treasury yields at around 4.1% suggests that the market has become more at ease with the anticipated interest rate trajectory of the Federal Reserve.
Following Federal Reserve Chair Jay Powell’s statement last week that a rate cut in March was unlikely, which was supported by several of his colleagues in recent days, the market has turned its attention to the upcoming Fed meeting in May, when the reduction of borrowing costs is expected to commence.
The current market prices in a 63.4% chance of at least a 25 basis point rate cut by May, as indicated by the CME FedWatch tool.
Investors have embraced this timeline, especially in light of positive economic data and signs indicating that some measures of core inflation have returned to the Federal Reserve’s targeted 2% level. These factors contributed to robust demand at Wednesday’s $42 billion auction of 10-year bonds conducted by the Treasury.
Treasury to Auction Billion of 30-Year Bonds
The Treasury has announced that it will hold an auction for $25 billion worth of 30-year bonds on Thursday at 1 p.m. Eastern Time. This move comes as part of the government’s efforts to manage its finances and meet its borrowing needs.
Economic Data on Thursday
On Thursday, there will be important economic data releases in the United States. At 8:30 a.m. Eastern Time, the weekly initial jobless benefit claims report will be published, providing insights into the state of the job market. Additionally, at 10 a.m., the December wholesale inventories data will be released, which will give an indication of business activity and inventory levels.
Richmond Fed President to Speak
Tom Barkin, the President of the Richmond Federal Reserve Bank, is scheduled to appear on Bloomberg Television at 8:30 a.m. Eastern Time. Later in the day, at 12:05 p.m., he will also deliver a speech in New York. Barkin recently commented that exercising caution and being “patient” before implementing rate cuts would be a prudent approach.
China’s Deflation Signals Struggles
Consumer price inflation in China experienced a significant decline of 0.8% year-on-year in January, marking the fastest deflation in 15 years. This development has raised concerns about the challenges faced by the world’s second-largest economy. Analysts believe that China’s ongoing property slump has impacted wealth perceptions and instilled greater caution among consumers when it comes to significant expenditures.
Outlook for the Chinese Economy
Susannah Streeter, the Head of Money and Markets at Hargreaves Lansdown, explained that China’s current economic struggles are contributing to a lack of confidence and spending restraint among consumers. While the Chinese government has implemented small stimulus measures aimed at rejuvenating trading activity and lending, these efforts are seen as temporary fixes rather than long-term solutions for the sluggish economy.
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