The 10-year US Treasury yield hit a new low in nearly a week. Traders are waiting for evening ISM manufacturing data

Zhitongcaijing · 06/03 11:25

The Zhitong Finance App learned that US manufacturing data is about to be released. Before providing the latest clues on how much the Federal Reserve may cut interest rates this year, the price of US Treasury bonds rose, and the benchmark yield fell to its lowest level in nearly a week.

According to the data, longer-term US Treasury bonds led the market. Previously, moderate inflation data released last Friday suggested that the Federal Reserve would cut interest rates at least once this year.

The next data to be released will be the manufacturing PMI index and ISM manufacturing data. The market generally expects that both data will show the resilience of the US economy.

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Since the Federal Reserve has previously stated that the speed of interest rate cuts will depend on economic data, the market has become highly sensitive to every data point. Last month, 10-year US Treasury yields fell by about 20 basis points. Inflationary pressure eased due to signs that the job market is cooling down.

Richard McGuire, head of interest rate strategy at Rabobank, said: “Market expectations for the Fed to cut interest rates continue to show more constructive policy prospects.” He added that this helped US Treasury bonds continue their gains late last week.

The 10-year US Treasury yield fell for the third day in a row, falling as high as 4 basis points to 4.46%, the lowest level since May 28. The yield on two-year treasury bonds did not change much, at 4.87%. Eurobonds also rose across the board, as the region's manufacturing PMI data mostly fell slightly short of expectations.

Also, before the Federal Reserve holds a policy meeting on June 12, the US employment data for May, which will be released on Friday, will be a major event this Monday. Overnight index swaps related to the upcoming conference continue to fully reflect expectations of a 25 basis point cut in interest rates in December, and the possibility of a rate cut in September as soon as possible has risen slightly to around 50%. The contracts suggest that interest rates will be cut by a total of 36 basis points, a slight increase from a week ago.