Bond Market Update

Narrow Range Maintained

• Longer-dated Treasuries have dipped back into the red while the short end is staying ahead with the 2-yr note sitting just below its morning high. The Treasury complex faced some pressure after the 11:00 ET release of the December Survey of Consumer Expectations from the New York Fed, but the 2-yr note was quick to bounce back while longer tenors marked fresh lows before returning to levels seen just before the survey was released. That survey showed no change in year-ahead inflation expectations (3.0%) while the three-year outlook increased to 3.0% from 2.6%. However, expectations on the five-year-ahead horizon dipped to 2.7% from 2.9%. As for rate cut expectations, the CME FedWatch Tool shows that the implied likelihood of a rate cut in May is now just 31.0%, down from 36.7% on Friday while the implied likelihood of a June cut is down to 53.3% from 55.4% on Friday.
• Yield Check:
  • 2-yr: -1 bp to 4.39%
  • 3-yr: UNCH at 4.48%
  • 5-yr: +1 bp to 4.60%
  • 10-yr: +1 bp to 4.79%
  • 30-yr: +1 bp to 4.98%