This post was originally published on this site
U.S. bond yields held steady Thursday as investors continued to absorb August consumer inflation data and waited for factory gate prices and an update on retail sales.
What’s happening
-
The yield on the 2-year Treasury
BX:TMUBMUSD02Y
was barely changed at 4.990%. -
The yield on the 10-year Treasury
BX:TMUBMUSD10Y
rose less than 1 basis points to 4.264%. -
The yield on the 30-year Treasury
BX:TMUBMUSD30Y
gained 1.6 basis points to 4.360%.
What’s driving markets
U.S. bond yields are relatively steady early Thursday as traders continued to absorb Wednesday’s mixed reading on August consumer price inflation and looked ahead to the August producer prices data and retail sales numbers, both due at 8:30 a.m. Eastern.
Other U.S. economic updates set for release on Thursday, include the weekly initial jobless benefit claims at 8:30 a.m. and July business inventories at 10 a.m..
Unless these releases contain significant shocks, the market is likely to continue pricing in a 97% probability that the Fed will leave interest rates unchanged at a range of 5.25% to 5.50% after its next meeting on September 20.
The chances of the central bank also standing pat at the subsequent meeting in November is priced at 60%, according to the CME FedWatch tool.
Meanwhile, benchmark German 10-year bund yields
BX:TMBMKDE-10Y
were down 1.3 basis points to 2.642% ahead of the European Central Bank’s policy decision, due at 2:15 p.m. local time, or 8:15 a.m. Eastern.
What are analysts saying
“Unusually, there’s quite a bit of uncertainty about whether it’ll [the ECB] deliver another hike today, or whether it’ll pause the hiking cycle after a run of 9 consecutive moves. Market pricing is currently pointing to a 66% likelihood of a hike [of 25 basis points] as we go to press this morning, which is up from 38% at the end of last week,” said Henry Allen, strategist at Deutsche Bank.
“In the meantime, the consensus of economists on Bloomberg is narrowly suggesting that the ECB will stay on hold, and that’s what our own European economists at DB expect as well. …They write that recent data has shown increasing evidence that tighter monetary policy is being transmitted, which favors a pause. Today will also see the release of the ECB’s latest growth and inflation forecasts, so one to watch out for,” Allen added.
