U.S. Treasury yields edged lower on Wednesday ahead of inflation data that could pressure the Federal Reserve to ease monetary policy this year, with market participants fearful of a recession.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, -0.77% fell 2 basis points to 2.120%. The 2-year note yield TMUBMUSD02Y, -1.69% retreated 3.7 basis points to 1.885%. The 30-year bond yield TMUBMUSD30Y, -0.52% edged lower by 1.9 basis points to 2.598%. Bond prices move in the opposite direction of yields.
What’s driving Treasurys?
Consumer price inflation for May is set for release at 8:30 a.m. Eastern time. Economists anticipate the CPI to increase 0.1%, from 0.3% in May. If the report confirms the lack of inflation pressures, it could present another thorn to the U.S. central bank as economists urge it to cut rates this year.
See: U.S. inflation expectations decline to lowest level since late 2017
Analysts say the Fed is most likely to ease policy in July, with traders on the fed fund futures market foreseeing an 80% chance of a cut in next month’s meeting by the Federal Open Market Committee, the central bank’s rate-setting body.
Investors will also a get a handle on an auction for $24 billion of 10-year notes at 1 p.m. Even as yields stay near multi-year lows, jittery market participants have demonstrated a strong demand for haven assets like government paper.
Opinion: Bond guru who called interest rate top in 2018 now says yields could fall further
What else is on investors’ radar?
Protests in Hong Kong have drawn the eye of some investors. Police on Wednesday fired tear gas at protestors who had massed outside of Hong Kong’s legislative chamber in opposition to a proposed extradition bill that has added to business uncertainty around the semi-autonomous city.
The Hang Seng Index HSI, -1.73% slipped 1.7% on Wednesday. Hong Kong’s one-month borrowing rate that banks use to loan funds to each other rose to 2.43%, around its highest level since Oct. 2008.
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