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Treasury yields edge up ahead of Tuesday’s CPI inflation data for November

Two- and 10-year Treasury yields continued to inch higher Monday morning, after posting their biggest one-day advances in months last Friday.

What’s happening

  • The yield on the 2-year Treasury 
    BX:TMUBMUSD02Y
     rose 4.4 basis points to 4.769% from 4.725% on Friday. Yields move in the opposite direction to prices.

  • The yield on the 10-year Treasury
    BX:TMUBMUSD10Y
    advanced 2.6 basis points to 4.27% from 4.244% Friday afternoon.

  • The yield on the 30-year Treasury
    BX:TMUBMUSD30Y
    rose 2.8 basis points to 4.353% from 4.325% late Friday.

What’s driving markets

U.S. government debt continued to sell off on Monday after Friday’s strong jobs data prompted traders to push back on expectations for the first Federal Reserve interest-rate cut next year. Fed-funds futures traders now see a 39.9% chance of at least a 25-basis-point cut by March, down from 57.4% a week ago, according to the CME FedWatch Tool.

The Fed is expected to hold interest rates steady between 5.25%-5.5% on Wednesday when it announces its next policy decision, though investors will carefully monitor comments from Chair Jerome Powell.

One last round of consumer price data is expected on Tuesday, ahead of the Federal Open Market Committee’s meeting. November’s CPI is expected by economists to show softer headline inflation, but a firmer core reading after stripping out food and energy prices.

The Treasury market is also facing two auctions on Monday, with a $37 billion sale of 10-year debt and a $50 billion sale of 3-year securities.

What analysts are saying

“With little in the way of major economic data on the calendar today, the bond market focus will be on the 3-year and 10-year Treasury auctions before positioning for tomorrow’s CPI. The consensus expectation for November core CPI is a 0.3% monthly increase,” said Will Compernolle, macro strategist for FHN Financial.

“We expect bidders at the coupon auctions to require some concession given the proximity to tomorrow’s CPI data and the Wednesday FOMC,” Compernolle wrote in a note.


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