Source: Zhitong Finance

US Treasury bonds continue to rise, and traders are awaiting key US CPI reports. The latest inflation data may stimulate the market to expect the Fed to cut interest rates more drastically and faster this year. Global bond prices rose, US Treasury yields fell across the board, and 2-year US Treasury yields led the decline. The money market has now fully determined that the Federal Reserve may cut interest rates by 25 basis points in September this year, while the probability of cutting interest rates a second time is 62%.

The focus on Tuesday was the US PPI data for April, followed by the US CPI data for April on Wednesday. These two figures are expected to show a slowdown in core inflation per year. However, there are many concerns in the market — earlier this year, the rise in US housing prices repeatedly exceeded expectations, triggering a deep sell-off in the market; a survey released by the New York Federal Reserve on Monday showed that US consumers' inflation expectations for the next year were at their highest level since November last year.

Société Générale strategists, including Kenneth Broux, wrote in a report: “This is just a number, but clear information on today's PPI and tomorrow's CPI may help to dispel some of the policy fog.”

Since the last inflation data was released in March, there have been signs that the US labor market is weakening, which has led investors to gradually increase their bets on the Federal Reserve's easing policy this year. The market has rekindled expectations that interest rates would be cut for the first time in September (not November), and resumed betting on cutting interest rates twice (not once). Interest rate sensitive 2-year US Treasury yields fell two basis points to 4.84% on Tuesday, down about 20 basis points from their peak two weeks ago.

Despite this, Federal Reserve officials are urging everyone to be patient. Federal Reserve Governor Bowman said on Friday that she did not expect interest rate cuts in 2024 to be appropriate. She pointed out that prices continued to rise in the first few months of this year.

Editor/jayden