This year, nothing determines the direction of the US bond market more than monthly inflation data.SlotmancasinonodepositbonusYes. This week is no exception.
The consumer price index (CPI) for April, released on Wednesday, will provide the biggest test yet of the market rally that began this month, when Federal Reserve chairman Jerm Powell dispelled fears that the central bank might raise interest rates again. The index rose after the US Department of Labor (Labor Department) reported a slowdown in job growth, with yields falling sharply from last month's peak.
The incident increases the risk of upcoming inflation data, which could prolong them or lead to another unfortunate turnaround in inflation. Until then, the market will be in "waiting mode", according to strategists at Bank of America Corp.
The CPI report earlier this year fuelled the sell-off in the bond market as the higher-than-expected data raised concerns that the Fed's inflation-fighting returns were stagnant.
The last time, on April 10, the yield on the 10-year Treasury note surged 18 basis points, the biggest one-day volatility caused by CPI data since 2002. All in all, half of this year's jump in benchmark interest rates of more than 60 basis points occurred on the day of the CPI release.
Jonathan Cohen, head of strategy for US interest rates at Nomura Securities International, saidSlotmancasinonodepositbonusThe reality of the current market is that we are stumbling in the process of data release. There does seem to be some weakness in the economy here-but in fact, to sustain this rebound, you need to confirm from the CPI data that things are not accelerating again and we are seeing anti-inflation. "
Until this month, the data largely highlighted the strength of the US economy, prompting traders to abandon widespread bets that the Fed would cut interest rates several times this year. This readjustment brings new losses to investors and weakens their confidence in the direction of the market.
Futures positions suggest that many investors have covered short bets on Treasuries as Treasury yields peaked last month. Overall, this positioning has been fluctuating as investors deal with market uncertainty, Ira Jersey, a US interest rate strategist, said in a report.
"it's a bit like people used to take risks and get burned, and now adventurers are a little at a loss," Cohen said. "
However, bond prices have risen steadily this month on new signs that the economy and labour markets are cooling, which will allow the Fed to start loosening monetary policy later this year.
The yield on the 10-year Treasury note fell on all but two trading days in May, falling nearly 20 basis points to 4. 5 per cent.SlotmancasinonodepositbonusAbout .5%. More broadly, as of May 9, Treasuries have risen by about 1. 5%.Slotmancasinonodepositbonus.3%, recovering some of the 2.3% decline in April, which is the worst in more than a year, according to the index.
CPI is expected to show a slowdown in inflation. Forecasters of the survey say the core rate-seen as the best indicator of potential stress because it excludes volatile food and energy costs-is expected to rise 0.3 per cent in April from a month ago, down from 0.4 per cent in March. The overall index rose 3.4 per cent from a year earlier, compared with a 3.5 per cent rise in March.
That is still well above the Fed's target of 2 per cent. Several US central bankers recently stressed that policy rates may need to remain high for longer and Governor Michelle Bowman said the recent rate of inflation suggested that a rate cut in 2024 might not be appropriate.
However, given the recent market rally, traders are likely to see any signs of progress in fighting inflation as a sign of buying. Matthew Luzzetti, chief US economist at Deutsche Bank AG, expects the Fed to cut interest rates for the first time until December. But he said: "given this momentum, investor sentiment is certainly more dovish."