Treasury Yields Decline as Investors Remain Cautious about US and Global Economy

Treasury yields in the US have fallen on Monday following cautious sentiments from investors about the state of the economy. The decline in US Treasury Yields suggests investors are worried about monetary policy as they anticipate official economic data.

The 10-year Treasury Yield, as of 5:40 am ET was at 3.787%, lower by 3 basis points. As of press time, the yield has fallen further to 3.775. A similar plunge was recorded in the 2-year Treasury, which was lower by 2 basis points at 4.725%

Last week, official data showed that the consumer price index rose by 0.2% compared to the month before, and was the lowest rise since March 2021. Figures from the consumer price index and other key economic data would likely sway the Fed’s decision on monetary policy in one way or the other.

Rising prices and inflation have caused the Fed to consistently increase interest rates. Over the last 11 meetings, the Fed has increased the interest rate 10 times. Now, projections have it that the probability the Fed will increase interest rates again is 92.4%. The market projection puts the rate at 5.25%-5.5%, with the Fed likely increasing the rate on July 26.

China’s Influence

Several global factors may also be preventing the Treasury Yields from rising. The state of the global economy is in question for many reasons, including data from China. Although the Chinese economy climbed 6.3% year-over-year (YoY) in Q2, the climb was lower than the expected 7.1%. JPMorgan also reduced its growth expectation for China to 5% from 5.5%, after cutting the country’s growth from 5.9% earlier. According to JPMorgan economists, instability in the housing market is a serious factor. They said:

“Since 2Q, housing market weakness has intensified in both demand (related to weak income expectations and weak house price expectations) and supply (weak incentive for private developers to buy new land and start new projects) sides. This points at a major challenge for policymakers of how to balance the long-term goal of economic transformation and near-term objective of growth stabilization.”

Last month, several other Wall Street banks cut their outlook on growth in China. Goldman Sachs, Bank of America, Standard Chartered, UBS, and Nomura, all posted reduced forecasts for the country’s growth.

Treasury Yields Have Been Fluctuating

As most of the world battles inflation and dwindling economies, the US has been no different as Treasury Yields have been wavering. Last month, CoinSpeaker reported that the 2-year Treasury Yield lost 4 basis points to 4.656%, lower than it now is. The same report also put the 10-year Treasury yield at 3.808%.

In the previous month, negotiations regarding the US debt ceiling significantly affected the 10-year and 2-year Treasury yields. At one time, the 10-year yield fell by 10 basis points to 3.719%, while the 2-year yield lost 7 basis points and hit 4.514%

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Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.