Treasury yields end lower amid dearth of data on Monday

By Vivien Lou Chen

Rates on U.S. government debt finished lower on Monday amid a lack of market-moving catalysts and ahead of the next major inflation update later in the week.

What happened

The yield on the 2-year Treasury BX:TMUBMUSD02Y fell 1.1 basis points to 4.855%, from 4.866% on Friday. Yields move in the opposite direction to prices.The yield on the 10-year Treasury BX:TMUBMUSD10Y dropped 2.4 basis points to 4.479%, from 4.503% on Friday. The yield is down nine of the past 12 trading days.The yield on the 30-year Treasury BX:TMUBMUSD30Y fell 2.4 basis points to 4.621%, from 4.645% on Friday. The yield is down five of the past seven trading days.

What drove markets

Traders were looking ahead to inflation data on Wednesday following surprising upsides seen in the first quarter that lowered expectations for the timing and number of Federal Reserve rate cuts this year. The median estimate for economists polled by the Wall Street Journal is for the annual headline rate of the consumer-price index to come in at 3.4% for April, compared with 3.5% in March. Core readings, which exclude food and energy, are expected to land at 0.3% for last month and at 3.6% year over year. Read: Why Wednesday's CPI report is taking on outsize importance in the financial market

On Tuesday, producer-price data for April will be released and Fed Chairman Jerome Powell is due to speak. Wednesday's CPI data will be released at the same time as retail-sales data for April.See also: Inflation trap? Stock market's near-record run faces the most crucial CPI reading of 2024.

What analysts are saying

"The Federal Reserve's plans to cut rates in 2024 depend crucially on inflation data resuming the interrupted disinflationary trend of 2023, and that, in turn, necessitates CPI monthly prints of no more than 0.2% increases, particularly in the core index," said Roman Ziruk, senior market analyst at London-based financial services firm Ebury.

"That hasn't happened in about half a year and is unlikely to happen in this week's April CPI report, according to economists' expectations," Ziruk wrote in an email on Monday. "Any further upward surprises would probably lead to a significant rethink to the Fed's path of rates over the remainder of the year. Consequently, we expect to see quite a bit of volatility right after the publication of the numbers on Wednesday."

-Vivien Lou Chen

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05-13-24 1537ET

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