Treasury Yields Edge Lower Ahead Of Release Of Delayed Data: Expert Says Soft CPI Should Calm Fed Officials’ Fears Of Sticky Inflation

• A slew of macroeconomic data is scheduled to be released this week, including the Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditure index, and housing data for November and December.
• The weekly ADP Employment Change report, scheduled to be out on Tuesday, will kick off this week’s macroeconomic data release.
• Jobless claims and fourth-quarter GDP data are scheduled for release on Thursday and Friday, respectively.

U.S. Treasury Yields edged lower on Tuesday as investors eyed the release of delayed economic data during the holiday-shortened week.

The benchmark 10-Year Treasury yield fell three basis points to 4.029%, while the 30-Year yield declined two basis points to hover at 4.67%. The 2-Year Treasury yield declined one basis point to hover at 3.401% at the time of writing.

Slew Of Macroeconomic Data Set To Release This Week

A slew of macroeconomic data is scheduled to be released this week, including the Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditure (PCE) index, and housing data for November and December.

The weekly ADP Employment Change report, scheduled to be out on Tuesday, will kick off this week’s macroeconomic data release, along with the Empire Manufacturing Index and the NAHB Housing Market Index for February. The Conference Board’s Employment Trends Index for January is also slated for release on Tuesday.

The Mortgage Bankers’ Association’s (MBA) 30-year mortgage rate data and the Federal Open Market Committee’s (FOMC) January meeting minutes are slated to be released on Wednesday.

Jobless claims and fourth-quarter (Q4) GDP data will be out on Thursday and Friday, respectively.

Where Are Treasury Yields Headed?

Following the softer-than-expected Consumer Price Index (CPI) print last week, yields for the 10-year note fell to a two-month low of 4.06%.

Meanwhile, Schwab Center for Financial Research’s head of fixed income research and strategy, Collin Martins, does not see room for yields to fall much further, absent a sharp economic slowdown.

“While inflation’s moving in the right direction, it’s still a bit elevated, and budget concerns and the rising trend in global bond yields should keep long-term Treasury yields elevated even as the Fed cuts rates later this year,” Martin said in a recent note.

Soft CPI Should Ease Fed Officials’ Concerns, Says Martin

Martin added that the soft CPI print for January should ease concerns among Fed officials about sticky inflation.

“This should be well received by those on the Fed worried about sticky inflation,” Martin said. He added that while this shouldn’t change the Fed’s monetary policy direction in the near term, more reports like this might bring more officials of the central bank on board for rate cuts.

According to data from the Bureau of Labor Statistics (BLS), on a seasonally adjusted basis, CPI rose 0.2% in January, after rising 0.3% in December. This puts the annual rate at 2.4% before the seasonal adjustment.

The odds of a 25-basis-point rate cut in June have edged up slightly to 51.7%, according to the CME FedWatch tool, up from 49% a week ago. However, the odds of a 25 bps cut in March remain low, at 7.8%.

The iShares 20+ Year Treasury Bond ETF (TLT) was up 0.16% at the time of writing, while the iShares 7-10 Year Treasury Bond ETF (IEF) was up 0.48%. Retail sentiment around the TLT ETF was in the ‘bullish’ territory.

Also See: Genuine Parts Weighs Split Of Auto, Industrial Units Into Two Public Companies: Report

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