Treasury yields are lower and flatter this morning as market participants react to the overnight Bank of Japan (BOJ) decision and multiple US data releases. In the first meeting of new BOJ governor Ueda, policymakers kept current rates unchanged but altered their forward guidance related to yield curve control (YCC). The change in guidance was expected, but the tone of the statement suggested a more patient approach to any such changes to the ultra-accommodative YCC program, easing market fears of any immediate actions. On the data front, the Employment Cost Index (ECI) rose 1.2% q/q in the first quarter, higher than expected (1.1%), and the prior quarter was revised higher from 1% to 1.1%. The March PCE report showed core inflation rising 0.3% m/m and 4.6% y/y, both as expected. The ECI and PCE data is unlikely to ease Fed leaders’ concerns over current price risks, but it hasn’t been enough so far to reverse this morning’s rally in Treasuries, which is likely fueled by the BOJ news and month-end demand.
Jason Haley
Chief Investment Officer
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