US Treasury bond yields increase against the background of latest PMI data

The recent data on the U.S. economy reinforced investors’ expectations of the further interest rate hikes by the Federal Reserve system. As a result, there was a decline in treasury yields registered on Monday.

At the moment, the markets expect the rates to peak at about 5% level in the middle of the next year, while the current range of rates is within 3.75%–4%. Besides that, the dollar surged, while U.S. stocks lost previous positions.

The moves spotted on Monday were caused by the latest figure of the Institute for Supply Management’s services gauge. In November, the gauge showed an unexpected increase to the level of 56.6. For comparison, the previous figure from a month ago was 54.4. The increase in the business activity measure became the most significant one for over a year and a half, thus indicating that the U.S. economy in general remains stable.

At the same time, there’s a possibility of the markets’ instability to stay while the year’s end is getting closer and market participants are anticipating the final Fed meeting on December, 14. It’s still widely suggested that the rate would be increased by a half-point. This would signal a slower pace of monetary tightening, as the Fed had previously hiked rates by 75 points.

At the moment, the Federal Reserve officials are traditionally silent on the eve of the meeting, avoiding any forecasting. So, investors are about to be even more attentive towards the incoming data, and especially towards a consumer-price inflation report, which is expected to be released next week.