US benchmark bond yields have dipped to near two-month lows as investors look forward to fresh economic data and insights from Federal Reserve officials. The 10-year Treasury yield has seen a notable decline from its peak last month, signaling a shift in market sentiment.
Market participants are channeling their funds into bonds amid expectations of easing inflation and a decelerating economy, which could prompt the Federal Reserve to consider interest rate cuts by mid-2024. Despite the certainty that rates will remain unchanged in the upcoming Federal Reserve meetings on December 13th and January 31st, there is growing anticipation of a potential rate cut at the May 1st meeting, with the odds now at 48%.
Investors are keenly awaiting a series of key economic reports due today, including weekly initial jobless claims, the October import price index, and the November Philadelphia Fed manufacturing survey. Additionally, statements throughout the day from various Fed officials are expected to provide further direction.
Strategists at Deutsche Bank (ETR:DBKGn), urged caution regarding the market's repeated expectations for a dovish shift from the Fed. They recalled how the emergence of the Omicron variant previously fueled similar expectations but warned that these could reverse.
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