Global bond rally wavers with jobs data next hurdle for Fed path

Treasury 10-year yields were little changed at 4.39% after sliding 11 basis points on Monday, when a report showed US factory activity shrank in May and output came close to stagnating. Upcoming job openings data will show hiring slowed for a second month in April, according to the median estimate in a Bloomberg survey of economists.

Still, buyers remain vigilant after a selloff last week. While yields are near the highest they’ve been in months, faster-than-expected inflation data is testing the market’s conviction in just how much policymakers can lower borrowing costs this year. 

Central bankers including Federal Reserve chair Jerome Powell have repeatedly stressed the need for more evidence that inflation is on a sustained path to the 2% goal before cutting interest rates.

“US Treasuries continue to look attractive, as the US economy is slowing more than others in the developed world,” strategists at Pictet Asset Management wrote in a note. Since “inflation is proving sticky”, the firm has a preference for US inflation-protected bonds, which look more attractively priced.