(Bloomberg) — US Treasuries held recent gains ahead of key economic data that is expected to show a slowdown in inflation and growth, as well as the debt management team’s plans for sales in the $29 trillion market.
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The 10-year yield fell one basis point to 4.16%, the lowest level in more than three weeks, and was down for a seventh day amid concern about a faltering US economy. The policy-sensitive two-year yield was up less than one basis point to 3.66%.
Traders are broadly on the sidelines ahead of key events for the market, including the so-called quarterly refunding plan, which will detail the Treasury’s strategy to fund a $514 billion borrowing need. Also on Wednesday, data is expected to show a contraction in US economic growth in the first quarter as well as a slowdown in inflation as measured by the PCE index in March.
“We are still not in the US recession camp. But we do see a marked slowdown relative to early-in-the-year expectations,” Mohit Kumar, a strategist and chief economist at Jefferies International, wrote in a note. “From a market perspective, this suggests that the risk sentiment rally is likely to stall and potentially take a step back.”
April was a highly volatile month for Treasuries, as investors gamed out the impact of President Donald Trump’s tariffs on inflation and economic output. This month’s trading range for the US 10-year government bond was the widest since the collapse of SVB in early 2023.
In recent days, the market rallied amid signs the US economy is stumbling. A measure of consumer confidence fell to an almost five-year low, job openings dropped to the lowest since September and a widely followed measure of Texas manufacturing activity weakened significantly.
That fueled bets on further interest-rate cuts from the Federal Reserve, with swaps now implying 95 basis points of easing this year, which means four quarter-point cuts are almost fully priced. That compares to just three at the end of March.
The wagers were also supported by easing inflation expectations. The US 10-year breakeven rate has fallen around 14 basis points in April, the most since 2023, and data later today is expected to show the Fed’s favored measure of price growth slowed to 0.1% in March from the month before.
