Traders Anticipate the Consumer Price Index on Wednesday – US Market Wrap

The world’s largest bond market began the week on the back foot, as geopolitical tensions subsided and traders prepared for this week’s key inflation data.

Treasury 10-year yields rose to their highest level since November, drawing closer to the 4.5% level that some investors see as a key threshold that will determine whether rates return to their 2023 highs. Traders’ belief in three quarter-point rate cuts from the Federal Reserve this year is quickly fading, with markets now favouring just two reductions.

Benchmark 10-year yields increased two basis points to 4.42%, after reaching 4.46% earlier Monday. The S&P 500 was hovering around 5,200. Megacaps were mixed, with Nvidia declining and Tesla rising nearly 5%. Oil fell after Israel announced that it would withdraw some troops from Gaza. Bitcoin surpassed $71,000.

Swap contracts imply around 60 basis points of US monetary easing this year, implying two cuts, the first of which is expected in September, according to pricing. On Friday, the chance of a third cut remained above 50%.