U.S. Government Bonds Take a Breather as Investors Await Economic Data

Overview

The rally in U.S. government bonds came to a temporary halt on Friday as investors prepared themselves for the release of key economic data. This includes the producer prices and a consumer sentiment gauge, which are expected to provide further insight into the state of the economy.

Market Movement

• The yield on the 2-year Treasury note (BX:TMUBMUSD02Y) increased by 2 basis points to 4.605%, up from 4.565% on Thursday.
• The yield on the 10-year Treasury note (BX:TMUBMUSD10Y) rose by 3 basis points to 4.266%, compared to 4.239% on Thursday.
• The yield on the 30-year Treasury note (BX:TMUBMUSD30Y) saw a rise of 2 basis points, reaching 4.438% from a previous 4.421%.

Market Factors

Traders are bracing themselves for the release of new economic data, making it a significant event for the market during an already eventful week. The January housing starts and the producer-price index, which is expected to decline by 0.1%, will be released at 8:30 a.m. Additionally, the preliminary February consumer sentiment survey by the University of Michigan is scheduled for 10 a.m.

Bond yields experienced a decrease on Thursday following weaker-than-expected retail sales data. However, this was offset by a rebound in a couple of Federal Reserve factory activity gauges.

These economic indicators have somewhat alleviated concerns sparked by Tuesday's higher-than-anticipated consumer price index data for January. The worry was that this might prompt the Federal Reserve to further delay plans to cut interest rates, leading to Treasury yields reaching levels not seen since December.

Atlanta Fed President Raphael Bostic, speaking after the market closed on Thursday, stated that given the current strength of the economy, rate cuts are not likely to occur until after July. Bostic highlighted the importance of ensuring that any signals received are reliable, rather than influenced by market volatility.

Investors will also have the opportunity to hear from Fed Vice Chair for Supervision, Michael Barr, scheduled to speak at 9:10 a.m., and later from San Francisco President Mary Daly at 12:10 p.m.