U.S. Treasury yields fell as investors remained focused on remarks from Jerome Powell that signaled the possibility of more rate hikes to tackle inflation.
A recent surge took 10-year yields to their highest level since November 2007 last week, as investors grappled with a surprisingly resilient U.S. economy and the possibility that sticky inflation could force the central bank to keep interest rates higher for longer.
With inflation steadily decreasing — but still above target — in many major economies, attention is increasingly turning to how central bankers will respond to a deteriorating growth outlook. Last Wednesday, economic data disappointed on both sides of the Atlantic. In the U.S., S&P Global's flash U.S. Composite Purchasing Managers' Index fell to a six-month low of 50.4 in August, down from a reading of 52 in July.
Both subindexes — the services index and manufacturing index — fell month on month. The manufacturing index slipped to 47.5 from 50. A reading below 50 suggests activity contracted. The services index slipped from 52.3 in July to 51 in August.Later in the week, the U.S. Labor Department is set to release nonfarm payrolls showing the pace of jobs and wage growth, which could guide the Fed on how to proceed with its monetary policy path.
The Treasury is expected to auction three-month and six-month bills as well as two-year and five-year notes.
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