The 10-year U.S. Treasury yield was flat on Monday after the Easter long weekend, while the 2-year yield was slightly lower.
The benchmark rate was trading around 4.2004% as of 4:25 a.m. ET. The yield on the 2-year Treasury note was 2 basis points lower at 4.5972%.
Yields and prices move in opposite directions and one basis point equals 0.01%.
Markets are reacting for the first time to the Bureau of Economic Analysis’ personal consumption expenditure figures for February – the Fed’s preferred inflation gauge – released Friday. Excluding food and energy, PCE rose 2.8% year-over-year and was up 0.3% from the previous month, meeting expectations.
These figures will likely reinforce the belief that the Federal Reserve will refrain from cutting rates at its next meeting. CME Group’s FedWatch tool shows traders expect the Fed to hold firm in May and put the chance of an interest rate cut in June at around 55%.
Last Wednesday, Fed Governor Christopher Waller insisted there was “no rush to cut the policy rate.” He said recent data indicated it was “prudent to keep this rate at its current restrictive level, perhaps longer than expected, to help keep inflation on a sustainable path toward 2 percent.”
His comments come amid growing sentiment that the Fed may keep rates at their current level for longer than expected.
Steven Blitz, chief U.S. economist at TS Lombard, told CNBC’s “Squawk Box Europe” on Thursday last week that the likelihood of a Fed interest rate cut this year looks “pretty good “.
Blitz said markets would continue to advance even if the Fed decides not to impose an interest rate cut this year.
However, Canaccord Genuity’s Tony Dwyer said he believes a deterioration in the jobs market and a slowdown in inflation will ultimately push the Fed to act.
“I’m not saying they need to go back to zero, but they need to be more aggressive,” the company’s chief market strategist told CNBC’s “Fast Money” on Thursday. “One of the most aggressive topics I talk to clients about is incoming data quality.”
There will be 13- and 26-week Treasury auctions on Monday, as well as ISM manufacturing figures for March and construction spending for February. Later in the week, the March jobs report is due Friday and will be closely watched.
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