Bond yields experienced a dip on Thursday in anticipation of the release of weekly jobless data and an influx of comments from Federal Reserve officials.
Key Details
- The yield on the 2-year Treasury (BX:TMUBMUSD02Y) decreased by 3.4 basis points to 4.897%. It should be remembered that yields move in the opposite direction to prices.
- The yield on the 10-year Treasury (BX:TMUBMUSD10Y) retreated by 2.6 basis points to 4.502%.
- Lastly, the yield on the 30-year Treasury (BX:TMUBMUSD30Y) fell 4.3 basis points to 4.655%.
Market Influencers
Benchmark bond yields remained close to their lowest level in two months as investors eagerly awaited new market catalysts. Furthermore, the 10-year Treasury yield has decreased by over 50 basis points since its peak of just above 5% a month ago.
In recent weeks, investors have gravitated towards bonds in the hopes that declining inflation and a cooling economy will persuade the Federal Reserve to initiate interest rate cuts by mid of next year.
The market is currently pricing in a 100% probability that the Fed will maintain interest rates within the range of 5.25% to 5.50% during its upcoming meeting on December 13th, as well as the subsequent meeting on January 31st, which is according to the CME FedWatch tool.
Moreover, the likelihood of a 25 basis point rate cut at the May 1st meeting is currently priced at 48%, showing an increase from the previous month’s estimation of 30%.
U.S. Economic Updates
On Thursday, there will be several important updates on the U.S. economy. Here are the key details:
Weekly Initial Jobless Claims
The weekly initial jobless claims will be released at 8:30 a.m. Eastern Time. This data provides insights into the current state of the job market.
October Import Price Index
Also at 8:30 a.m., the October import price index will be published. This index measures the changes in the prices of imported goods, indicating trends in international trade.
November Philadelphia Fed Manufacturing Survey
At the same time, the November Philadelphia Fed manufacturing survey will be released. This survey gauges the manufacturing activity in the Philadelphia region and provides valuable insights into the overall health of the manufacturing sector.
Industrial Production and Capacity Utilization
At 9:15 a.m., data on industrial production and capacity utilization for October will be published. These indicators give an overview of the output levels in various industries and the extent to which production capacity is being utilized.
November Home Builder Confidence
At 10 a.m., the November home builder confidence index will be announced. This index reflects the sentiment of home builders regarding the current state of the housing market.
Federal Reserve Officials’ Comments
Throughout the day, several Federal Reserve officials will be making comments. Here is the schedule:
- Cleveland Fed President Loretta Mester will speak at 8:30 a.m.
- New York Fed President John Williams will address at 9:25 a.m.
- Fed Vice Chair for Supervision Michael Barr is scheduled for 10:35 a.m.
- Fed Governor Lisa Cook will speak at noon.
Analysts’ Perspectives
Analysts have shared their views on the current situation:
“This is now the seventh time in the last two years we’ve had a very clear example of markets getting excited about a dovish pivot, and on the previous six, those dovish expectations have entirely unwound again,” warned Jim Reid, macroeconomic strategist at Deutsche Bank.
“It all started with the Omicron variant being seen as the reason the Fed wouldn’t be able to raise at all in 2022…At some point there will be a dovish pivot, and this could be closer than the others to it, but be wary that we’ve now been to this well seven times in two years,” Reid added.