The 10-year Treasury yield is down today to 4.77% which is only slightly higher than yesterday's high of 4.80%. It is holding at the highest levels since November 2023 and every eye we see results touching the necessary mark of 5%. That marked the 2023 high before things reversed as traders were eyeing more Fed rate cuts in 2024 at the time.
This time, we see traders feeling that inflation could be more stable in 2025; especially with Trump's tariffs in the picture.
The thing is, recent inflation data has also shown that the disinflation process is easing a bit. Looking at previous reports, we can see that monthly core inflation has come in at +0.3% over the past four months. You have to go all the way back to July for a +0.2% reading.
According to ING, the running rate for the last four reports translates to 4% inflation annually. That is not good news if we continue to see the monthly readings coming in like that. So, that will be a key one to watch tomorrow.
The expected figure for monthly core inflation is +0.2%.
How does this relate to bonds? The thing is if price pressures continue to point to the idea that inflation is holding steady and that Trump's policies are yet to be introduced, it will be difficult to pick a turning point for output. Maybe 5% faster than we think.
