US 10Y TREASURY: relaxation is coming

US FED officials decided to leave the rates unchanged at the FOMC meeting during the previous week, however, the much better than expected jobs data influenced major Treasury yields move during the previous week. Although the market was expecting to see the figure of 180K, the released figure was almost doubled to 353K. In the eyes of market participants, this means high potential that the inflation will not drop down to targeted 2%, as expected, but the period might be prolonged, in which sense, Fed might keep currently elevated interest rates for a longer period of time, then previously estimated. In line with it, current expectations are that the first rate cut might occur in May this year. The 10Y Treasury yields responded accordingly, with a shift from 3.82% up to 4.04% as of the end of the week.

The 4.0% has been tested for one more time. Based on current charts, there is a low probability that yields can go to the higher grounds. Instead, some relaxation could be expected in the week ahead, down to 3.9%, eventually 3.8% in the coming period.