U.S. Treasury yields showed little movement in early trade Thursday as investors prepared for several key data releases, which will shed further light on the evolving inflationary backdrop and the outlook for interest rates.
The yield on the 10-year U.S. Treasury note — the benchmark for government borrowing — was flat at 4.2872%. Meanwhile, the yield on the 2-year Treasury note, which is typically more sensitive to short-term Federal Reserve interest rate decisions, fell about 1 basis point to 3.7832%.
The longer-dated 30-year Treasury note yield was flat at 4.8806%.
One basis point equals 0.01%, or 1/100th of 1%, and yields and prices move inversely to one another.
Tuesday night’s ceasefire agreement between the U.S. and Iran saw energy prices slide on Wednesday, with investors piling into U.S. Treasurys as they ramped up bets on the potential for Fed rate cuts. Tensions remain, however, as the ceasefire appears increasingly fragile, with oil prices trading higher on Thursday.
Traders are now pricing in a near-25% probability of a rate cut by year-end, according to the CME’s FedWatch tool, after odds on a rate cut jumped on Wednesday.
Investor attention now turns to a number of key domestic data releases later.
The Commerce Department will release the latest personal consumption expenditures price index for February, before the start of the Middle East conflict. The core PCE price index — the Fed’s preferred gauge of underlying inflation in the U.S. economy — came in at 0.4% in January, and consensus expectations indicate a 0.4% reading for February.
Federal Reserve minutes from March’s meeting showed policymakers remain open to future rate hikes should inflation continue to exceed 2%, while stressing the need to be nimble.
Other data releases expected later include the GDP growth rate for the fourth quarter, which was 4.4% for the previous period, as well as monthly personal income and spending data for February.