A series of upcoming economic reports and Congressional testimony from Federal Reserve Chairman Jerome Powell could jolt US government bonds out of a narrow trading range.
Yields on benchmark US 10-year Treasuries, which move inversely to bond prices, have bounced between about 4.20% and 4.35% since mid-June, as the market digested data showing slowing inflation and signs of cooling economic growth in some indicators. The 10-year yield stood at 4.33% on Friday.
So far, the economic numbers have failed to dis pel doubts over how deeply the Fed will be able to cut interest rates this year, keeping Treasury yields range-bound. But next weeks US employment data, followed by inflation numbers and Powells appearance could change that outlook .
The market has settled into a narrative that we may see incremental softness but not a growth scare, said Garrett Melson, a portfolio strategist at Natixis Investment Managers Solutions. That will continue to keep us in this range, but the one thing that will push it meaningfully lower is an increase in the unemployment rate.
US monthly inflation as measured by the personal consumption expenditures (PCE) price index was unchanged in May, a report released on Friday showed , advancing the narrative of slowing inflation and resilient growth that has tamped down bond market gyrations and buoyed stocks in recent weeks. Yet futures linked to the fed funds rate showed traders pricing in just under 50 basis points of rate cuts for the year.
