By Davide Barbuscia
NEW YORK- US Treasury yields were mixed on Monday as investors awaited guidance from the US central bank and June inflation data later this week to assess the next moves for government bonds.
Benchmark 10-year yields were last at 4.269 percent , slightly lower than on Friday. Two-year yields which are more directly linked to changes in monetary policy expectations, were at 4.618 percent , up from 4.599 percent on Friday.
Yields, which move inversely to prices, had fallen sharply on Friday after closely watched jobs data showed a weakening US labor market, which bolstered expectations that the Federal Reserve will begin to cut interest rates in September.
Fed Chair Jerome Powell’s testimony before the Senate on Tuesday and the House on Wednesday could give investors more clues on the likely direction of rates. Some expect Powell to strike a relatively dovish tone in light of recent data, after saying in a speech last week that the US economy was back on a disinflationary path.
“You’ve had some less than favorable economic data so I think, while he’s not going to be over the top dovish, he’ll be more dovish than he is hawkish in my opinion, and then we’ll see what CPI brings,” said Tony Farren, managing director at Mischler Financial Group.
A Federal Reserve Bank of New York consumer survey released on Monday showed inflation a year from now was seen at 3 percent as of June, down from the 3.2 percent increase expected in May.
The release on Thursday of the June Consumer Price Index (CPI) could inject more optimism among bond investors about a possible central bank shift to lower rates, if it comes within expectations. The probability of a 25 basis point Fed rate cut in September stood at 71 percent on Monday, with traders of futures contracts tied to the Fed policy rate betting on a total of two 25-point cuts for the whole of 2024.
Treasuries on Monday were also reflecting moves in European markets, where French government bond yields fell to two-week lows after Sunday’s election resulted in a hung parliament, assuaging fears of a far right victory.
“Some of the geopolitical risk in Europe is tempered and that might be helping keep yields in the US in check for now,” said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management. – Reuters
