The U.S. consumer price index (CPI) was largely in line with expectations in May, boosting bond market expectations that the Federal Open Market Committee (FOMC) will keep rates on hold at its meeting on May 13-14. .
Trends in the interest rate swap market have lowered the odds of an 11th straight rate hike at the meeting to about 10%. The current policy rate range is 5-5.25%. The odds of a 0.25 percentage point hike at the July meeting have also declined, but remain higher than the odds of no rate hike as inflation remains high.
Abby Joseph Cohen, a former senior investment strategist at Goldman Sachs Group Inc., told Bloomberg Television. I’ve been there and I would vote to go wait and see.”
Yields fell initially in the Treasury market but reversed ahead of the 30-year Treasury auction.
Yields on two-year bonds fell by 9 basis points (bp, 0.01%) to 4.49% before rising above 4.6%.
| government bond | Latest price | YoY change (bp) | Rate of change |
|---|---|---|---|
| US 30-year bond yield | 3.92% | 3.9 | 1.00% |
| US 10-Year Treasury Yield | 3.79% | 5.1 | 1.35% |
| US 2-Year Treasury Yield | 4.63% | 5.3 | 1.16% |
| US Eastern Time | 11:46 |
Composite CPI decelerated to 4% year-on-year increase. Service prices, which exclude energy and housing, were up 0.2% month-on-month, according to Bloomberg calculations.
U.S. consumer price index slows year-on-year growth in May, room for rate hike pause
Bond markets “were a little short heading into this meeting, so the initial reaction was a rally of relief,” said Ed Al-Husseini, rates strategist at Columbia Threadneedle Investments. However, he said, “The basic view is that there is little in this statistic to force a rate hike decision on the 14th.”
Original title:Bond Market Decrees Inflation Readings Will Let Fed Skip June(excerpt)
2023-06-13 15:54:00
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