Before the US CPI was announced in November, the market “rushed”: US bond yields fell

The Zhitong Finance App learned that on Thursday, the price of US Treasury bonds rose slightly, and the market is paying close attention to the US November CPI report to be released later. Policymakers and investors will carefully analyze the report to find clues about next year's monetary policy prospects. Prior to the release of the report, 10-year US Treasury yields fell 2 basis points to 4.13%. The release of this report is quite special because the US Bureau of Labor Statistics was unable to collect price data due to the previous US government shutdown, which led to the cancellation of the October report. Since there is no comparable data for October, investors and Federal Reserve officials will have to refer to year-on-year data to determine the trend of inflation.

The US Bureau of Labor Statistics's November data collection was also delayed due to the government shutdown, adding another element of uncertainty to this much-publicized data. Given that Fed officials have huge differences over interest rate trends, the current outlook for the Fed's monetary policy is uncertain, which may lead to a report that is difficult to interpret. Economists predict that the US CPI will grow at 3.1% year on year in November, and the core CPI will grow at 3% year on year.

Jordan Rochester, head of macro strategy at Mizuho Bank, said, “The impact of US CPI data on transactions will be slightly different. We need a major accident to reverse the situation.”

On a busy day in global financial markets, relevant data came out one after another. The Bank of England and the European Central Bank announced interest rate decisions for December on Thursday. Investors are also closely watching news about US President Trump's election for the next Federal Reserve Chairman. Trump said on Wednesday evening that he will announce the nominees “soon” and that the candidate to succeed Powell will be “someone who believes in low interest rates.”

The Federal Reserve cut interest rates last week for the third time this year, but it was opposed by three parties — including two regional Federal Reserve presidents who prefer to keep interest rates unchanged, and Federal Reserve Governor Stephen Milan, who insisted that interest rates be cut more drastically by 50 basis points. Additionally, six policy makers submitted interest rate forecasts last week, indicating their opposition to this rate cut.

This has created uncertainty about investors' outlook for 2026. The median market forecast shows that policymakers expect to cut interest rates by 25 basis points next year — that is, once, while the money market is betting on cutting interest rates at least twice.

Recently, there has been a significant change in the market's pricing of interest rate cuts prospects. Given the uncertain pace of interest rate cuts, the trading price of 5-year US Treasury bonds is relatively superior to 2-year and 30-year US Treasury bonds. The indicator has been rising for seven consecutive days, setting a record for the longest continuous increase since March, with an increase of more than eight basis points, reaching 94 basis points. The higher the value, the higher the market's preference for 5-year treasury bonds. The focus is also increasingly shifting from inflation to a cooling labor market. The unemployment rate rose to 4.6% in November, according to data released on Tuesday.