Global bonds rallied as European consumer price data came in softer than expected and investors awaited data on the Federal Reserve’s favoured inflation gauge.
Treasury 10-year yields retreated from a one-month high, falling three basis points to 4.33%. German, U.K. and Japanese counterparts all dropped around five basis points. Money markets have added to bets this week on more Fed cuts and are now split on between two and three reductions by year-end.
Some investors are also reducing risk before the US plans to announce so-called reciprocal tariffs on April 2, which analysts say risks driving up inflation and hurting global economic growth. US yield curves have steepened this week, with the gap between five- and 30-year bonds climbing to the highest since 2022.
Economists surveyed by Bloomberg expect US core personal consumption expenditures price index to rise 0.3% in February, an unchanged pace compared to the previous month.
“Given the ongoing pessimism, Treasuries may respond better to an inflation undershoot,” said Evelyne Gomez-Liechti, a strategist at Mizuho International Plc.
Meanwhile, French and Spanish inflation numbers undershot median estimates, boosting wagers on more easing by the European Central Bank. Swaps imply two quarter-point reductions and a 40% chance of a third by year-end, the most in a month. Traders expect the Bank of England to deliver a further half-point of cuts this year.
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