Yield Movements
The yield on the 2-year Treasury note BX:TMUBMUSD02Y, which closed the previous week at 4.365%, experienced a decline.
The 10-year Treasury note BX:TMUBMUSD10Y saw its yield decrease to 4.104% from 4.159% at 3 p.m.
The yield on the 30-year Treasury bond BX:TMUBMUSD30Y also declined, reaching 4.343% compared to the late Friday figure of 4.388%.
Market Drivers
Today, the U.S. Treasury Department is scheduled to unveil its revised forecast for first-quarter borrowing, along with a preliminary estimate of its second-quarter needs.
The Federal Reserve is widely expected to leave the fed-funds rate unchanged at 5.25% to 5.5%. However, investors will focus on the policy statement and remarks by Fed Chair Jerome Powell for insights into the anticipated timing of rate cuts.
Fed-funds futures traders have priced in a slightly better than 50% chance of a quarter-point cut by the Fed’s March 20 meeting, and there is a greater than 50% chance that the fed-funds rate will fall to at least 3.75%-4% by December, according to the CME FedWatch tool.
In addition, the December jobs report, set to be released on Friday, will be closely watched for any signs of cooling in the labor market.
Crude oil benchmarks, both U.S. CL00, +0.10% and global BRN00, +0.04%, rallied last week, hitting their highest marks since November. The rally was driven by concerns over Middle East tensions and U.S. production outages caused by cold weather. Although oil futures spiked higher during Asian trading hours in response to the drone attack and U.S. military fatalities, they later pulled back.
Expert Commentary
“Powell probably won’t alter current market sentiment. The economy is holding up very well, and inflation is evolving favorably as well,” noted analysts at KBC Bank in Brussels, as stated in a client note. They further added, “The Fed chair, against this backdrop, probably isn’t inclined to be outright hawkish. We believe that anything other than that will prolong the dovish sentiment in the markets.”