Treasury yields fall

US Treasury yields retreated as investors gauged the health of the US economy and weighed the Fed’s upcoming interest rate decision.

The 10-year Treasury rate retreated by 3 basis points to 3.538%. The 2-year Treasury last traded at 4.157% after falling 3 basis points.

Earnings and prices are inversely related; one basis point equals 0.01%.

After last week’s mixed economic reports, investors weigh what could be next for the US economy.

Thursday’s April data from the Philadelphia Fed’s manufacturing index showed that business activity in the region slowed again, well above expectations. On Friday, April’s flash PMI numbers beat expectations for both services and manufacturing.

Investors await the Dallas Fed’s latest manufacturing index release for fresh insights. Several key reports will also become public this week. This will include durable goods orders, gross domestic product growth rate, and the personal consumption expenditure price index.

The latter is one of the Fed’s favorite measures of inflation and, therefore, could influence the central bank’s future policy direction, including a new decision on interest rates.

A big spending spree in China after Beijing lifted its COVID-19 lockdown will help dampen quarterly reports from the world’s biggest companies, despite forecasts that the United States and Europe are headed for a corporate recession.

Fears are growing that the tightening of credit will disrupt the global economy. Europe is also going for recession, with statistics showing a 5.42% drop in income in the second quarter.

At the peak of the banking sector crisis, markets were preparing for a major downturn and even for central banks to reverse course and cut interest rates.