U.S. Treasury Yields Decline as Investors Weigh Economic Data and Inflation Concerns

U.S. Treasury yields fell on Tuesday as investors assessed economic data and the state of the economy. By 6:37 a.m. ET, the yield on the 10-year Treasury had dropped by over 2 basis points to 4.276%. The 2-year Treasury yield had also declined by more than 2 basis points to 4.693%. Yields and prices move in opposite directions. One basis point equals 0.01%. Investors were watching for signs of the economy's performance amid higher interest rates and persistent inflation, considering Monday's data on new home sales, which showed a 1.5% increase in January, lower than the 2.4% estimate, due to elevated mortgage rates.

Impact of Economic Reports

This week's economic reports, including updated gross domestic product figures, durable goods order for January, the S&P/Case-Shiller home price report, and fresh consumer confidence data, are expected to provide insights into the future path of Federal Reserve interest rates. The personal consumption expenditures price index, a key inflation measure for the Fed, will also be crucial in assessing inflation. The Fed has emphasized that its decision-making will be guided by data, and it is seeking more evidence that inflation is moving toward the 2% target. The latest inflation data for January exceeded expectations, suggesting to investors that inflation might persist longer than anticipated. Market expectations for the first rate cut have shifted from as early as March to June in recent weeks, influenced by comments from Fed speakers and economic data releases.