After a two-day decline, the bond market made a partial recovery on Wednesday. An initial surge in bond prices slightly receded, but there was a noticeable improvement as the day wore on. This led to a decrease of the benchmark ten-year note yield by 4.1 basis points, bringing it down to 4.274 percent.
The increase in bonds was influenced by updated data from the Commerce Department, showing the U.S. economy growth rate for the fourth quarter of 2023 was slightly less than formerly predicted. There was a downward revision from 3.3 percent to 3.2 percent on the real gross domestic product (GDP) for the period. Most experts expected no change in the GDP surge.
"In a market where people are anxious about the Federal Reserve maintaining higher rates for longer, any decrease in economic activity or inflation could be viewed as a signal for an earlier rate cut," noted Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance.
However, the initial wave of bond purchasing began to ebb just after trading began, seemingly due to traders' hesitance to make larger moves in light of the forthcoming consumer price inflation figures set to be released on Thursday.
These anticipated inflation statistics, often relied on by the Federal Reserve, are predicted to show that the annual rate of consumer price growth dropped to 2.4 percent in January, down from 2.6 percent in December. The core consumer prices' annual growth rate, excluding food and energy costs, is also projected to decrease to 2.8 percent in January from December's 2.9 percent.
As Federal Reserve officials require more assurance of slowing inflation before considering interest rate cuts, these data are likely to significantly influence the prediction for interest rates.
While these inflation figures will doubtless be the focus on Thursday, traders will also be paying attention to weekly jobless claims and pending home sales reports.
