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Federal Reserve officials continue to "crack down" on expectations of interest rate cuts, and U.S. bond yields rise across the board

2024-02-06

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The U.S. bond market weakened across the board on Monday (February 5) local time. Federal Reserve officials, including Powell, further emphasized that it was unlikely to start cutting interest rates soon. The strong economic data released recently caused the market and other official institutions to raise their fundamentals. Restoring expectations also “dampens” enthusiasm for rapid interest rate cuts.

According to data from the U.S. Treasury Department, as of Monday's close, U.S. bond yields have collectively risen. The 2-year U.S. bond yield has risen 11.7 BPs to 4.483%, the 3-year U.S. bond yield has risen 12.3 BPs to 4.269%, and the 5-year U.S. bond yield has risen 12.3 BPs to 4.269%. The yield rose 13.8 BPs to 4.123%, the 10-year U.S. bond yield rose 13.7 BPs to 4.161%, and the 30-year U.S. bond yield rose 11.7 BPs to 4.339%.

Minneapolis Fed President Kashkari said earlier that although the benchmark interest rate is currently at the highest level in more than 20 years, it has not hurt economic growth, so policymakers can wait and see for a while before making a decision. Whether interest rates need to be cut.

Kashkari posted on the website: "At least in the post-epidemic economic recovery period, the neutral policy rate has risen, which gives the Federal Open Market Committee (FOMC) time to complete its analysis of economic data before making a decision to cut interest rates. assessment to reduce the risk of excessive policy tightening.”

The day before, Fed Chairman Powell made almost the same statement. He pointed out, "The Fed has shifted its focus to deciding when to start cutting interest rates, but solid economic growth means officials do not have to rush to make this decision. The current economic situation is good, and it is believed that inflation is declining in a sustainable way."

At the same time, the Organization for Economic Cooperation and Development (OECD) also raised its forecast for global GDP growth to 2.9% from the 2.7% expected in November 2023, and significantly raised its forecast for U.S. GDP growth from 1.5% to 2.1%. The OECD believes that the inflation rate in the United States in 2024 will be 2.2%, and the inflation rate will further slow down to 2% in 2025, which is also the lowest level among the Group of Seven countries.

"There is no reason for U.S. debt to rise," said Saxo Bank's senior fixed income strategist. "If the inflation rate continues to remain above the Fed's 2% target, the Fed's moves in cutting interest rates may disappoint the market."

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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Federal Reserve officials continue to "crack down" on expectations of interest rate cuts, and U.S. bond yields rise across the board

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