Treasury yields cool after surging last week

10-year Treasuries yields down more than 3bp to 1.55%

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The big jump to the upside came after the warm US CPI data, but we’re seeing the market not getting too carried away – at least for now – as yields pull back slightly today.

10yr yields are down over 3bp to 1.55% while 2yr yields are down 1.5bp to 0.505% as we turn to European morning trading.

Fedspeak will be the main thing to watch this week as the market looks for clues to sentiment after inflation numbers last week.

That said, don’t expect too much from Fed officials in the days ahead. I shared some thoughts last Wednesday ahead of the release of the US CPI data:

Expect Team Transitory to be on top of any slight dip in inflationary pressures, but in the event of surprise beats, they will maintain that “this is highly anticipated” with the narrative being that the trend is expected to continue early on. next year at least.

As such, don’t expect there to be any real lessons to be learned from today’s report.

A higher reading primarily reaffirms the current upward trend in price pressures, but there isn’t much evidence to deny Team Transitory’s argument that all of this will subside and subside as we look to the middle of next year.

In short, inflationists have more to lose over the next few months if price pressures don’t exactly follow the trend we’ve seen throughout the year so far.

But in any case, we can only wait for the data to provide us with more clarity on the macro situation around the world and this will not be resolved until 1H 2022 at least.

While today’s data may see market participants getting a little nervous, remember that it will be a marathon and not a sprint when it comes to the inflation debate.

For now, market players are also settling in a bit, with the dollar also slightly weaker. However, the greenback continues to reside in a good technical position overall and this has not changed despite a slight breeze at the moment.


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