Tuesday saw benchmark U.S. 10-year Treasury yields stay around two-week lows as investors considered the surprising resilience in the labour market following the Treasury Department’s revelation on Monday that it will not need to borrow as much as it had predicted in October.
Decrease In Interest Rate
Because the labour market will probably indicate when the Federal Reserve will start lowering benchmark interest rates this year, markets are paying close attention to it. On Wednesday, the Fed will wrap up its two-day policy meeting.
The amount of interest rate reduction the Fed anticipates will probably be revealed during Fed Chair Jerome Powell’s news conference, even if markets have priced in a near-certainty that the Fed would maintain benchmark rates at their current level.
In contrast to expectations of a cut at the March meeting at the beginning of the year, markets are now projecting the first 25 basis point cut in May.
According to Frank Rybinski, head of macro strategy at Aegon Asset Management, “it’s the quiet before the storm.” “For a March cut to happen you’d have to have some pretty clear communication from the Fed laying the groundwork tomorrow, but when you look at the economic data and where the labour market is it’s hard to have a high degree of confidence that they will see the need to cut.”
Supply Of Bonds
The Labour Department announced on Tuesday that U.S. job vacancies unexpectedly increased in December and that data for the previous month was revised higher, indicating that demand in the labour market.
(Photo: Tennessee Star)
The Treasury Department’s revelation on Monday that it will not need to borrow as much as it had predicted in October has caused a little decline in yields, allaying some investor concerns over an excess supply of bonds.
According to Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets, yields fell below their 200-day moving average on Monday, which historically has indicated another 10 to 12 basis point decline over the following three trading sessions.
