US 10Y TREASURY: focused on PCE data

U.S. Treasury markets remained volatile this week, with the 10-year Treasury yield holding near multi-month highs. On Friday last week 10Y yields reached 4,6% levels, however, Monday and Tuesday this week impact strong further movement toward the upside. The highest weekly level was at 4,69%, while yields are closing the week at 4,57%. Investors continue to reassess the outlook for inflation, Federal Reserve policy, and economic growth. Persistent inflation concerns, supported by elevated oil prices and resilient economic data, reinforced expectations that the Fed could maintain higher interest rates for longer. Markets also reacted to uncertainty surrounding future government borrowing needs and fiscal spending, which continued to pressure longer-dated bond yields higher.
Investors are now closely monitoring upcoming PCE inflation data and additional economic indicators for clearer signals on the direction of monetary policy and the near-term trend in Treasury yields. In this sense, the higher volatility might continue also in the week ahead. At this point there is equal probability for yield movements. On a longer time scale, if yields continue to hold levels above the 4,6%, then the next target might be 4,8%. However, for the week ahead testing of 4,5% is still quite a possible scenario for 10Y yield movements.