After the inflation panic, the 10-year U.S. Treasury bond stabilized at 4.50%. The next market influence will be tonight's retail data?

The Zhitong Finance APP noted that after a turbulent week, U.S. Treasury prices stabilized on Friday, as traders faced the reality that another rate cut may still be a long way off.

The yield on the U.S. two-year Treasury rose 10 basis points earlier this week and is now nearly flat compared to last week's closing price, at 4.29%. The yield on the 10-year Treasury also changed little, slightly above 4.50%.

If the U.S. retail sales data for January, to be released tonight, slows as expected due to cold weather, the bond market may receive a boost later today. This would spark hopes for further easing of policies this year, increasing interest in government bonds. On Thursday, a producer price report calmed the market's concerns midweek over hotter-than-expected consumer inflation data, giving U.S. Treasuries some breathing room.

A survey released by Bank of America on Friday showed that investor pessimism towards U.S. bonds has eased, with fewer investors expecting the 10-year bond yield to exceed 5% this year, while more investors anticipate yields to fall below 4%. However, participants also indicated a significant drop in confidence, reflecting an unclear macro outlook.

Evelyne Gomez-Liechti, a strategist at Mizuho International, stated, "These markets are not easy to trade." She still prefers to sell when the dollar appreciates significantly.

The inflation data released on Wednesday clearly reminded everyone that prices must cool further for the Federal Reserve to continue cutting rates. The Fed's easing path is still far from certain due to concerns over a global trade war triggered by President Trump's tariff threats.

The growing demand for inflation protection has driven up the prices of short-term Treasury Inflation-Protected Securities (TIPS). The yield on the two-year U.S. Treasury is about to fall below 1% for the first time since 2022.

Nicolas Trindade, a senior portfolio manager at AXA Investment Managers, is cautious about U.S. interest rate risks or durations, favoring Europe instead. The firm expects the Fed will not cut rates this year, while overnight interest rate swaps suggest the Fed will cut rates by about 30 basis points.

"The main risk in 2025 is a resurgence of inflation, which would lead the Fed to raise rates," he said, adding that he bought a large amount of short-term TIPS after Trump's victory in November last year. "The market certainly hasn't priced this in."