U.S. Treasury yields search for direction after the long weekend

The
10-year
U.S.
Treasury
yield
was
flat
early
on
Monday
following
the
long
Easter
weekend,
while
the
2-year
yield
was
marginally
lower.

The
benchmark
rate
was
trading
around
4.2004%
at
4:25
a.m.
ET.
The
yield
on
the
2-year
Treasury
note
was
2
basis
points
lower
at
4.5972%.

Yields
and
prices
move
in
opposite
directions
and
one
basis
point
equals
0.01%.

Markets
are
reacting
for
the
first
time
to
the
Bureau
of
Economic
Analysis’
personal
consumption
expenditures
reading
for
February
—
the
Fed’s
preferred
inflation
gauge
—
released
on
Friday.
Excluding
food
and
energy,

the
PCE
rose
by
2.8%
on
a
12-month
basis
and
was
0.3%
higher
from
a
month
earlier,
meeting
expectations.

The
figures
will
likely
add
to
the
belief
that
the
Federal
Reserve
will
hold
off
on
cutting
rates
at
its
next
meeting.

The
CME
Group’s
FedWatch Tool
shows
that
traders
are
expecting
the
Fed
to
stand
pat
in
May,
and
are
pricing
in
around
a
55%
chance
of
a
cut
to
interest
rates
in
June.

On
Wednesday
last
week,
Fed
Governor
Christopher
Waller
insisted
there
was
“there
is
no
rush
to
cut
the
policy
rate.”
He
said
recent
data
indicated
it
was “prudent
to
hold
this
rate
at
its
current
restrictive
stance
perhaps
for
longer
than
previously
thought
to
help
keep
inflation
on
a
sustainable
trajectory
toward
2
percent.”

His
comments
come
amid
a
growing
sense
that
the
Fed
could
keep
rates
at
their
current
level
for
longer
than
expected.

Steven
Blitz,
chief
U.S.
economist
at
TS
Lombard,
last
week

told
CNBC’s “Squawk
Box
Europe”
on
Thursday
that
the
likelihood
of
one
or
no
Fed
interest
rate
cuts
this
year
was
looking “pretty
good.”

Blitz
said
markets
would
continue
to
march
higher,
however,
even
if
the
Fed
decides
not
to
impose
any
interest
rate
cuts
this
year.

However,

Canaccord
Genuity’s
Tony
Dwyer
said
he
thinks
a
deteriorating
jobs
market
and
easing
inflation
will
ultimately
push
the
Fed
to
act.

“I’m
not
saying
that
they
have
to
go
back
to
zero,
but
they
have
to
be
more
aggressive,”
the
firm’s
chief
market
strategist
told
CNBC’s “Fast
Money”
on
Thursday. “One
of
the
most
aggressive
topics
that
I
talk
to
clients
about
is
how
bad
the
incoming
data
is.”

There
will
be
13-week
and
26-week
Treasury
auctions
on
Monday,
as
well
as
the
ISM
manufacturing
figures
for
March
and
construction
spending
for
February.

Later
in
the
week,
the
jobs
report
for
March
is
slated
for
Friday
and
will
be
closely
watched.