Investors favor shorter-term Treasuries amid rising inflation

Bond investors are changing their focus in the Treasury market, expecting slower economic growth and rising inflation. This shift has led to increased demand for short-term Treasury bonds, which are now offering lower yields. In contrast, longer-term bond yields are starting to rise. On Friday, the market will get important inflation data. This data is crucial for making decisions about interest rates. Last week, five-year Treasury yields fell below 4% after the Federal Reserve updated its economic growth forecasts. This suggests that investors are betting on rate cuts later this year. As of Friday, 30-year bond yields rose, surpassing five-year yields by almost 60 basis points. This gap is the largest seen since September. Friday will also see the release of personal income and spending data for February, which includes an inflation measure the Federal Reserve targets. The inflation rate was 2.5% in January, and economists believe it will remain at that level for February. However, the core rate, which excludes food and energy prices, is expected to rise to 2.7%. This week also features the final Treasury coupon auctions of the month, with $183 billion in new two-, five-, and seven-year notes being offered.