- Treasury yields were little changed as investors await Fed's rate decision.
- Uncertainty over the rate hike, some Fed officials suggesting 25 bps increase.
- Economic data throughout the week will be closely watched to inform Fed's next moves.
On Monday, U.S. Treasury yields remained relatively unchanged as investors were trying to anticipate the Federal Reserve's next interest rate decision and evaluating the overall economic outlook. As of 5:27 a.m. ET, the yield on the benchmark 10-year Treasury slightly increased by just 1 basis point, reaching 3.497%.
Meanwhile, the 2-year Treasury yield remained flat at 4.185%. The relationship between yields and prices is inverse, so when the yields go up, the prices go down and vice versa. Additionally, one basis point is equivalent to 0.01%.
Investors are currently uncertain about whether the Federal Reserve will choose to hike interest rates by 25 or 50 basis points at its next meeting on January 31st and February 1st. In recent weeks, Fed speakers have hinted that they may consider slowing down the rate increases to 25 basis points, with some, including Fed Governor Christopher Waller, stating outright that they would favor a smaller increase. This uncertainty is taking place in the context of declining wholesale and consumer inflation figures for December.
Many investors are hoping for the central bank to slow down, or even completely pause, rate hikes this year. The pace of rate increases announced by the Fed in its efforts to combat high inflation has sparked concerns among some of a possible recession.
No key economic data is expected to be released on Monday. As the week progresses, investors will be closely following a series of reports, including S&P Global's purchasing managers' index report on Tuesday, GDP figures on Thursday, and the personal consumption expenditure price index on Friday. The latter is one of the Fed's favored inflation gauges and could therefore inform the central bank's next policy moves.