(Bloomberg) — Bond traders priced in a slightly larger amount of Federal Reserve rate cuts this year after a barrage of US economic data showing stronger-than-expected economic growth and continued ebbing of price pressures.
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Treasury yields declined by at least four basis points across the maturity spectrum — without erasing Wednesday’s increases spurred by stronger-than-anticipated economic activity gauges for January — as the total amount of rate cuts priced in for this year crept higher by a similar amount.
The raft of US data released Thursday included the first estimate of the economy’s fourth-quarter growth and inflation rates and weekly jobless claims data that showed slackening in the labor market.
“There’s improving prospects for a soft landing here,” Matthew Luzzetti, chief US economist at Deutsche Bank AG, said on Bloomberg Television. With inflation cooling, the Fed “should be cutting rates by the middle of this year.”
Swap contracts that anticipate Fed interest-rate moves continue to fully price in a first move in May, while increasing the expected total this year to 138 basis points.
(Adds comment and context, updates yield levels)
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