US 10Y TREASURY: Fed on the move

The US inflation data, posted during the previous week, clearly showed that the inflation in the US is slowing down. It is still above the Fed's target of 2%, but it opens the space for the Fed to cut interest rates. Markets are almost sure that the first rate cut will occur at September's FOMC meeting, which is scheduled for September 19th. The market positioned itself in accordance with expectations during the previous weeks, by decreasing yields on the US Treasury bonds. The 10Y US Treasury benchmark reached the lowest weekly level at 3,61%, still ending the week at 3,65%.

Considering that the FOMC meeting is scheduled for the week ahead, some increased volatility could be highly expected. The 10Y Treasury yields might oscillate a bit up to the levels around 3,70%, looking for an equilibrium. Fed Chair Powell’s rhetoric after the meeting would shape the investors sentiment, in which sense, some higher movements might be possible. Still, on a long-run, the interest rates and yields would certainly trade with a clear downtrend.