Treasury Yields Hold in Tight Range as Traders Await Data

On Tuesday morning, rates on U.S. government debt remained largely unchanged as investors absorbed remarks from Federal Reserve officials and anticipated the release of May's inflation data later in the week.

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Current Treasury Yields

• The yield on the 2-year Treasury BXrose slightly by less than 1 basis point to 4.739%, up from 4.734% on Monday.
• The yield on the 10-year Treasury BXedged down to 4.245%, compared to 4.248% at 3 p.m. Eastern time on Monday.
• The yield on the 30-year Treasury BXincreased marginally by less than 1 basis point to 4.382%, from 4.377% on Monday.

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Market Influences

Treasury yields have seen little fluctuation recently as investors await new market-driving events.

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On Tuesday, data revealed that home prices in the 20 largest U.S. metropolitan areas reached another record high, though the rate of growth is decelerating. Home prices in these major metros rose by 7.2% over the 12 months ending in April.

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Additional key events for Tuesday include a report on U.S. consumer confidence, comments from Fed Governor Lisa Cook, and a $69 billion auction of 2-year Treasury notes by the Treasury Department.

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Federal Reserve Outlook

A team at Deutsche Bank, comprising Amy Yang, Matthew Luzzetti, and Brett Ryan, noted that recent communications from Fed officials convey a "cautiously optimistic" perspective on inflation. This outlook keeps the possibility of a rate cut in September open.

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However, they pointed out that such an outcome would likely depend on the next few months displaying subdued inflation readings similar to those expected for May. Additionally, Fed Chair Jerome Powell suggested there may be a need for some softening in growth and labor market data. The Deutsche Bank team anticipates the first rate cut in December, followed by two more cuts in the first half of 2025.

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Upcoming Economic Data

Traders will closely monitor the May personal consumption expenditure (PCE) price index data, the Federal Reserve's preferred inflation measure, scheduled for release on Friday. This data is crucial as it will influence the Fed's decisions on interest rates and economic policy moving forward.

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