Currently at 4.01%, up by 7 basis points since Friday's close.
Increase attributed to higher German Bond yields following ECB policymaker Holtzmann's comments against rate cuts in 2024.
10-year Treasuries have traded within a 25 basis points range (3.85% - 4.05%) over the past month after the perceived pivot of Fed policy on December 12-13th.
Price Action Last Week:
10-year bond had a subdued response to December Consumer Prices (CPI) and Producer Prices (PPI) inflation prints.
10-year yields rose after CPI but dropped post-PPI, ultimately settling around 4% (+/-).
2-Year Treasuries:
2-year yields were bid higher after favorable PPI numbers, closing the week at 4.14% (down 25 basis points from the high mark post-CPI).
Presently at 4.18%, reflecting higher rates with German Bunds.
Despite overnight Fed Funds at 5.25%-5.50%, the market expects the Fed to lower the rate by over 150 basis points by year-end 2024, contrasting the Fed's forecast of a 75-basis point decrease.
Economic Outlook:
Economic data indicates strength, inconsistent with a highly dovish Fed policy as implied by the market.
Inflation has steadily improved over 18 months; December CPI is at +3.4% YoY, slightly higher than expected and the previous month.
December Core CPI (ex-food and energy) at 3.9% YoY and 0.3% for the month.
Producer Price Index (PPI) was friendly, with top-line prices negative month-over-month (-0.1%) and Core-PPI (ex-food and energy) unchanged month-over-month at 0%.
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