U.S. Treasury bond yields experienced a modest rise on Monday, following comments from Minneapolis Federal Reserve President Neel Kashkari suggesting that the Federal Reserve might delay cutting interest rates until December. At 6:17 a.m. ET, the 10-year Treasury yield increased by 2 basis points to 4.236%, while the 2-year Treasury note yield also rose by 2 basis points to 4.708%.
This increase in yields comes after Kashkari’s interview with CBS News on Sunday, where he described a potential delay in rate cuts as a “reasonable prediction.” He emphasized the need for more substantial evidence that inflation is decisively moving toward the Fed’s 2% target before any rate cuts are implemented. Kashkari stated, “We’re in a very good position right now to take our time, get more inflation data, get more data on the economy, on the labor market, before we have to make any decisions.” He also noted that if only one rate cut were to occur this year, it would likely be toward the end of the year.
This cautious outlook from Kashkari came after last week’s lower-than-expected producer price index (PPI) for May, which measures inflation at the wholesale level. The PPI data had initially fueled optimism for a Fed rate cut, subsequently causing Treasury yields to fall. However, the Federal Reserve decided to maintain the current rates at 5.25% to 5.50% during their last meeting and hinted that only one rate cut might take place by the end of the year.
Investors are now turning their attention to key economic data releases scheduled for this week. On Tuesday, May retail sales figures are expected, which will provide further insight into consumer spending and economic health. Later in the week, data on home sales and housing starts will be released, offering additional perspectives on the housing market and broader economic trends.
The interplay between Fed communications, inflation data, and economic indicators continues to influence market expectations and Treasury yield movements. As investors digest Kashkari’s comments and upcoming economic data, the bond market is likely to remain sensitive to any signs that might indicate a shift in the Fed’s policy direction.