US bond rates soar to 6-week highs awaiting inflation data

The return on 10-year paper reached 3.755% on Monday, the highest level since January 6. For its part, the two-year debt yield reached 4.560%, its highest level since the end of November. * Yields have continued to rise since the release of better-than-expected jobs data earlier in the month, which showed employers added 517,000 jobs in January. The unemployment rate reached 3.4%, its lowest level in 53 years.

This led many investors to recalibrate the odds that the Fed will raise its interest rate beyond the maximum of between 5.00% and 5.25%. widely forecast ahead of jobs data.

“There is a dynamic where technical (investors) are going to want to buy, and fundamental (investors) are clearly saying that we are going to continue to sell, at least until we have more data,” said John Madziyire, portfolio manager and head of Bonds and Inflation at Vanguard’s Fixed Income Group.

Addressing the jobs data last week, the Fed Chairman, Jerome Powell left the door open to raise the reference rate beyond 5.00%-5.25%.

Markets now await the release of the latest Consumer Price Index data on Tuesday. Economists polled by Reuters they expect headline and core CPI to rise 0.4%m/m in January.

Following the CPI report, the US Census Bureau will release the January retail sales report on Wednesday, another piece of data closely watched by the Fed and markets. Retail sales are expected to rebound 1.6% in January after falling 1.1% in December, according to a Reuters poll of economists.

The yield curve between the two-year and 10-year notes inverted to -83 basis points, after reaching -88 basis points last week, the highest since December 13. The deep inversion in this part of the yield curve indicates concern about an impending recession.