Traders assess timeline of interest rate cuts

U.S. Treasury bond yields ticked higher Monday, following comments by Minneapolis Federal Reserve President Neel Kashkari indicating the central bank may not cut rates until December.

The 10-year Treasury yield was trading 2 basis points higher at 4.236% at 6:17 a.m. ET. The 2-year Treasury note yield was also up around 2 basis points at 4.708%.

Yields and prices move in opposite directions. One basis point is equivalent to 0.01%.

The rise comes after Kashkari on Sunday said in an interview with CBS News that it was a “reasonable prediction” that the Fed would not cut interest rates until December, adding that more evidence was needed “to convince us that inflation is well on our way back down to 2%.”

“It’s really going to depend on the data,” Kashkari said. “We’re in a very good position right now to take our time, [to] get more inflation data, get more data on the economy, on the labor market, before we have to make any decisions … But, if you just said there’s going to be one cut, which is what the median indicated, that would likely be toward the end of the year.”

Last week, the producer price index — a measure of inflation at the wholesale level — came in lower than expected for May, boosting hopes of a Fed rate cut and sending Treasury yields lower. The central bank opted to hold rates steady at 5.25% to 5.50% last week, and indicated that just one rate cut would take place this year.

Key data due out this week includes May retail sales figures, expected on Tuesday. Home sales and housing starts data are due later in the week.

It’s a short week in the U.S., with markets closed on Wednesday for the Juneteenth holiday.