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U.S. Bond Yields Update



  • The yield on the 2-year Treasury BX:TMUBMUSD02Y dropped by 2.3 basis points to 4.587%.
  • The yield on the 10-year Treasury BX:TMUBMUSD10Y slipped 2.4 basis points to 4.192%.
  • The yield on the 30-year Treasury BX:TMUBMUSD30Y eased 2 basis points to 4.333%.

Market Trends

A mild risk-off sentiment is fueling a surge in Treasury purchases on Tuesday as investors keep an eye out for potential market drivers in the days ahead.

Key Drivers

  • Federal Reserve Chair Jay Powell is set to testify before Congress on Wednesday and Thursday, setting the stage for important market insights.
  • The release of February’s nonfarm payroll report on Friday could solidify expectations for future Fed policy decisions.
  • Currently, there is a 97% likelihood that interest rates will remain steady at 5.25% to 5.50% after the Fed’s March 20th meeting, based on the CME FedWatch tool.
  • The probability of a 25 basis point rate cut at the May meeting has decreased to 23.7% from 62.3% just a month ago, while a cut in June is priced at 65.1%.

Central Bank Rate Expectations

The central bank is anticipated to lower its Fed funds rate target back to around 4.57% by December 2024, as indicated by 30-day Fed Funds futures.

Economic Updates

U.S. economic updates scheduled for release on Tuesday include January factory orders and February ISM service sector activity, both at 10 a.m. Eastern time.

Central Bank Official Comments

Central bank officials expected to make comments include Fed Vice Chair for Supervision Michael Barr, with speeches at noon and again at 2:15 p.m.

Analyst Insights

Stephen Innes, managing partner at SPI Asset Management, shared his perspective on the current economic conditions and potential central bank actions:

“Given the persistent inflationary pressures, accommodative financial conditions, steady economic growth, and robust labor market conditions, it is reasonable to expect a more hawkish tone from Federal Reserve Chair Jerome Powell. However, it’s challenging to envision a substantial departure from the recent guidance provided by other policymakers.”

Innes added, “Hence, Powell’s messaging reflects a balanced approach, acknowledging the need for vigilance on inflation while emphasizing the importance of supporting economic recovery. Any shift in policy stance would likely be gradual and cautious, considering the uncertainties in the economic outlook and the potential impact of monetary policy adjustments.”

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