Bonds Analysis by James Picerno covering: United States 10-Year. Read James Picerno's latest article on Investing.com
Bowing to recent data, Federal Reserve Chairman Jerome Powell on Tuesday conceded that inflation progress has stalled and the case for rate cuts has weakened.
“The recent data have clearly not given us greater confidence, and instead indicate that it’s likely to take longer than expected to achieve that confidence.”Treasury yield is paying attention and rose to 4.67%, the highest since Nov. 6. The question is whether the benchmark rate is still trading in a range.
On that basis, it appears that the 10-year rate has risen more than is warranted by two estimates of term premia. The debate is whether the models are wrong or the Treasury market is overcompensating for expected risk. Assuming that the outlook is accurate, when will the Treasury market revise its expectations accordingly? For the moment, that realignment doesn’t appear imminent. Accurate or not, the crowd requires a higher inflation premium, even if that demand is headed for an attitude adjustment. As a result, it wouldn’t be surprising to see the 10-year yield move closer to the 5% mark in the weeks ahead.
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