US 10Y TREASURY: a FOMC week

The previous week was a bit mixed for US Treasuries. Certainly, the most important weekly event was related to the inauguration of the new-old US President. The market was closely watching which pre-election promise will take place in the coming period. For the moment, promised tariffs on imported goods are set aside, so fear of potential inflation was a bit postponed. However, a new moment occurred when the President was addressing a business gathering in Davos, Switzerland, when he noted that he will request a drop in interest rates, immediately. Taking into account that decrease of interest rates is the responsibility of the FOMC in the US, this move from the US Administration currently remains unclear.

The 10Y US benchmark yields started the previous week around the level of 4,52% and moved up toward the level of 4,66%. At Friday's trading session, Treasury yields eased till the level of 4,61%. The week ahead brings the FOMC meeting on January 28-29, which is a promise of a potential volatile week. The “rejection” of the 4,65% level at Friday's trading session, implies a probability of a further decrease in Treasury yields, but not below the 4,55% level. On the opposite side, in a FOMC week, surprises are always possible.