Treasury yields slide amid bets on Fed’s expectations

On Friday, US Treasury yields slipped further as markets are busy gauging whether the US central’s recent campaign of interest rate hikes has reached its peak following a week of soft inflation data.

The 2-year Treasury yield, which is highly sensitive to rate expectations, had dropped by 4 basis points to 4.805%. The benchmark 10-year yield, meanwhile, dipped by 5 basis points to 4.390%. Yields move inversely to prices.

The market is obviously monitoring any change in the rate hiking cycle.

The chances that the Fed may choose to reduce borrowing costs as soon as March of next year have risen in recent days, although markets are betting that a cut at the central bank’s May meeting is more likely.

The all-important Fed funds rate currently stands at a range of 5.25% to 5.50% following an unprecedented tightening cycle aimed at quelling elevated inflation.

Figures this week showed an unexpected decline in wholesale prices in October, while growth in consumer prices was slower than anticipated last month. The numbers fueled hopes that the elevated interest rates are working to bring inflation back down to the Fed’s stated 2% target.

Oil prices, a key portion of headline price growth, are also on track to fall for the fourth straight week.