After a slightly uneven trading session last Thursday, treasury bonds experienced a remarkable decline on Monday. Bond prices significantly dropped during the morning trade and maintained a robust negative trajectory throughout the afternoon. Consequently, the yield on the key ten-year note rose by 12.3 basis points to 4.329 percent, which inversely correlates with its price.
The downward trend in treasury was an immediate response to the U.S. consumer price inflation data, announced while markets paused for Good Friday. While the data, which the Federal Reserve allegedly prefers, mostly matched economic predictions, traders expressed doubts concerning whether inflation is decelerating fast enough to justify the foreseen interest rate cuts.
As per the Commerce Department's report, the yearly rate of consumer price growth marginally increased to 2.5 percent in February from 2.4 percent in January, congruent with forecasts. Besides, the yearly growth rate of core consumer prices, excluding food and energy, decelerated to 2.8 percent in February from 2.9 percent in January, which was a revised estimate.
Adding to the downward trajectory, the Institute for Supply Management released a report demonstrating a surprising modest growth in U.S. manufacturing activity in March. The manufacturing Purchasing Managers Index (PMI) escalated to 50.3 in March from 47.8 in February; with a score above 50 signifying sectoral growth. It was an unexpected increase as economists predicted the index to barely rise to 48.4. This increase pushed the index back into the expansion zone, which it hadn't seen since September 2022.
The ISM also noted that the price index, driven by commodity costs volatility, increased to 55.8 in March from 52.5 in February. Trade on Tuesday may be influenced by reports on factory orders, job openings, and observations from several Federal Reserve officials.
