Yields on the 10-year US Treasury note stabilised above 4.53% on Monday after briefly coming under strain the previous session. Market participants reacted to the latest personal consumption expenditures (PCE) inflation data, which eased fears about the pace of rate cuts next year.
Core PCE prices, the Federal Reserve’s favoured gauge of underlying inflation, edged lower than expected and recorded the smallest monthly climb in six months.
Picture: US 10-Year Note hovering near recent highs, as traders weigh Fed signals and incoming economic data, as seen on the VT Markets app.
USNote10Y traded in a tight range, closing at 108.94, just shy of the 108.98 high. Short-term moving averages (MA5, MA10, MA30) hover close to the current price on the 15-minute chart, indicating a levelling in momentum.
The MACD (12,26,9) has flattened near the centre line, showing that the earlier upswing to 109.23 may be losing some steam.
This soft reading of inflation data undermined the Fed’s hawkish message from last week, when policymakers scaled down their forecast from four rate cuts to only two in 2024.
Traders now price in 44 basis points of rate reductions next year, a level that lingers below the central bank’s projection. A cautious approach may work best in this fluid environment, as Treasuries could see shifts if growth moderates faster or if fresh data affirms the Fed’s current stance.
Meanwhile, trader sentiment picked up after Congress passed spending legislation on Saturday, sidestepping a looming US government shutdown. This development soothed worries of funding disruptions and lifted market morale.
Equity traders may respond by rotating between growth and defensive sectors, seeking a safer balance while the economy adapts to ongoing changes in monetary policy.
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