US government interest rates were slightly higher on Monday, but a key yield curve remained inverted, with investors considering the Federal Reserve’s likely policy move next week.
Around 06.04 ET the yield on the benchmark index for 10-year government bonds climbed to 2.963%, while the yield on the 30-year government bond rose to 3.117%. The yield moves in reverse to prices.
The gap between 2- and 10-year interest rates remained inverted as the market weighs the possibility that the Fed will raise interest rates by 75 basis points at its meeting on 26 and 27 July, instead of the more aggressive alternative of 1[ads1]00 basis points. . The 2-year yield was last seen at 3.156%.
Inversions of yield curves – when short-term government bonds have higher returns than long-term ones despite lower risk – are often seen by markets as a sign that a recession is imminent.
An increasing number of analysts have suggested that an interest rate increase of 100 basis points may be on the table after inflation continued to rise more than expected. Fed Governor Christopher Waller said on Thursday that he supports an increase of 75 basis points, but will monitor incoming data and can support a larger move if necessary.
The threat of more aggressive monetary tightening required to curb inflation has led to concerns about a potential economic recession, Fed Chairman Jerome Powell noted last month as a possibility.
On the data front, the NAHB housing market index for July matures at 10.00 ET.