Treasury Yields Gyrate as Traders Reassess Rate Cut Timing Amid Bumpy Inflation
• Bond traders priced in more Fed rate cuts in 2023 despite higher than expected inflation in December • Yields initially surged but then fell back as traders saw value in 4% Treasury yields amid expectations for rate cuts • The yield curve steepened as longer-dated Treasuries rallied after the 30-year bond auction • Market pricing implies the Fed funds rate will be around 3.8% by end of 2024, below the Fed's forecast • Inflation is seen as bumpy ahead which could delay expected Fed rate cuts, but term premiums make bonds attractive