The U.S. Treasury yield curve steepens as the market focuses on May CPI and the results of the 10-year Treasury auction

According to Zhitong Finance APP, as investors await the U.S. May CPI data and the results of the 10-year Treasury auction, U.S. Treasury yields have risen. As of the time of publication, the yield on the 30-year Treasury bond has increased by 4 basis points to 4.96%, while the yield on the 2-year Treasury bond remains steady at 4.02%, causing the U.S. Treasury yield curve to steepen.

The U.S. May CPI will be released at 20:30 Beijing time. Investors are closely watching whether President Trump's tariffs will affect consumer prices. The market currently expects the U.S. May CPI to rise by 2.5% year-on-year, up from the previous value of 4.3%; and to rise by 0.2% month-on-month, unchanged from the previous value. Additionally, the market expects the U.S. May CPI to increase by 2.9% year-on-year, up from the previous value of 2.8%; and to rise by 0.3% month-on-month, higher than the previous value of 0.2%. XTB research director Kathleen Brooks stated, "Inflation data could determine the Fed's next move. The biggest question is whether tariffs will start to have an impact."

Meanwhile, a $39 billion 10-year Treasury auction will take place later on Wednesday. Amid growing concerns about the U.S. government's fiscal situation, these two long-term Treasury auctions will test investor demand for long-term debt.

Currently, traders' bets on the Fed's interest rate cut outlook remain unchanged, with expectations of a 42 basis point cut by the end of the year. Policymakers have reiterated a "wait-and-see" stance, deciding whether to further ease policy only after assessing the impact of Trump's trade policies.

Nicolas Trindade, a senior portfolio manager at AXA Investment Managers, stated, "We may see a rate cut before the end of the year, but it is far from certain and entirely depends on the developments in tariffs and inflation." It is reported that his portfolio has about 10% allocated to U.S. Treasury Inflation-Protected Securities (TIPS) to guard against unexpected inflation rises. He said, "We will gain clearer information through the U.S. CPI data."

Andrew Balls, Chief Investment Officer of Global Fixed Income at investment giant Pacific Investment Management Company (Pimco), believes there is still more risk premium space in the long-end yield curve and added that he prefers exposure to Treasury bonds with maturities between five and ten years. He stated, "From a long-term perspective on global fiscal conditions, the situation in the U.S. is particularly prominent."