Market Analytics and Considerations
Key Notes
On Friday, after statistics revealed a sharp drop in consumer prices in December, some investors questioned the market’s belief that the Federal Reserve will be obliged to reduce interest rates later in this current year, pushing Treasury yields higher a little. The yield on benchmark 10-year notes sank to a month trough of 3.424percentage points on Thursday as a result of a 0.1percentage drop in overall CPI, the first drop since May 2020, which spurred a surge in Treasuries.
Yields fluctuate in opposition to their price. The University of Michigan Measurements of Consumers data published on Friday revealed that the one-year inflation prediction dipped from 4.4percentage points previous month to a tentative estimate of 4.0percent in January, supporting the idea that inflation is slowing down.
After falling to 3.418percentage points in early trade, the yield on the 10-year note increased by 5.5 basis points to 3.502percentage points on Friday, a hint that not everyone in the market believes Fed policymakers will continue to assert that rates will remain elevated for longer. The Fed’s decision to halt rising policy rates will represent a significant turning point for the market and significantly increase tolerance for risk.
On February 1, when the Federal Reserve’s two-day policy conference concludes, the market anticipates a rate hike of 25 basis points with a 91.6percentage likelihood. As according futures estimates for the Fed’s goal range for rates dropping to 4.925percentage points in July and 4.469percent of total in Dec, the market believes the Fed will cut rates later this year.
Increasing to -73.0 basis points, the difference between the 2-year and 10-year yields A 4.1 basis point increase brought the 30-year Treasury bond’s interest to 3.615%. The contribution margin rate for U.S. Treasury Inflation-Protected Securities (TIPS) with a 5 maturity was 2.241%, and for TIPS with a 10 expiration it was 2.183%, suggesting that the market anticipates rising prices will be 2.2percentage points annually over the next ten years.
Current Net Yield% Price Change (bps) Bills for 3 months 4.5075 4.6199 0.011 bills for 6 months 4.6225 4.7957 -0.002 Note for 2 years 100-9/256 4.23 0.092 Note for 3 years 99-242/256 3.8945 0.083 Note for 5 years, 101-56/256 3.6038 0.060 Notes for 7 years, 101-248/25, 3.5527, 0.055, 6 Notes for ten years 105-32/256 3.5035 0.056 Bond for twenty years 102-248/25 3.7854 0.044 6 Bond for 30 years 106-248/25 3.616 0.042 Spreads for 6 dollars Latest recent (bps) Net Change (bps) United States two years greenback swapping spread: -2.00 26.75 U.S. dollar conversion spread across three years: 14.00-1.25 U.S. dollar conversion spread over five years: 3.75 0.00 U.S. greenback 10-year swapping spread: 3.75 minus 0.25 United States dollars Thirty-year swapping spread: -38.75 1.25
