Bond Market Update

Gains Extended

• U.S. Treasuries have continued adding to their post-CPI gains with issues in the belly leading the way. Thanks to the early advance, yields on 10s and 30s are now at their lowest levels in a week while yields on shorter tenors are revisiting lows from Thursday. The December CPI report has led to increased hopes for another rate cut from the FOMC, though the implied likelihood of a cut in May is still below 50.0%. The CME FedWatch tool shows a 47.9% implied likelihood of a cut on May 7, up from yesterday's 36.6%. Meanwhile, the implied likelihood of a cut in June has increased to 66.5% from 57.3% yesterday. Equities are off to a strong start with the S&P 500 (+1.8%) trailing the Nasdaq (+2.2%) and Russell 2000 (+2.4%).
• Yield Check:
  • 2-yr: -9 bps to 4.27%
  • 3-yr: -13 bps to 4.34%
  • 5-yr: -14 bps to 4.45%
  • 10-yr: -14 bps to 4.65%
  • 30-yr: -12 bps to 4.87%