Odaily reported that Julius Baer analyst Afonso Borges said in a note that the mild rally led by short-term U.S. Treasuries after Wednesday’s U.S. May CPI report “makes sense.” According to Borges, the inflation data came in better than expected and should reduce the risk that the Federal Reserve raises interest rates later this year.
Two-year Treasury yield moves averaged only 3 basis points
The fixed income analyst said the market response was clearly more moderate than the sharp volatility triggered last Friday, when the employment report was stronger than expected. Short-term Treasuries are closely tied to expectations for the interest-rate path, but the move following this CPI release was much smaller than the reaction seen after the jobs data.
Borges also noted that, on the release days of the past 12 inflation reports, the average move in the two-year Treasury yield was only 3 basis points. He described that level of movement as “very moderate” and less than half of the average move seen on employment report release days. The remarks were reported by Jinshi.