longerterm bond yields rose on monday but remain near 3month lows as investors continue to fret about a global economic slowdown the benchmark 10year treasury yield is inching up on monday but remains about 70 basis points below the cycle high hit in october a decline that reflects concerns the federal reserve’s sharp interest rate hikes to combat inflation will push the us economy into recession the fed raised rates by 50 basis points last week to a range of 425 to 45 and officials at the central bank have made clear they think borrowing costs may have to stay higher for longer than many in the market think there was tough talk too on rate rises from the european central bank last week which also raised rates by 50 basis points investors seem not to have taken the fed at its word however and since last week’s comments from chairman jay powell they are betting on a lower “terminal rate” for borrowing costs in this cycle believing the damage to the economy has already been done markets are pricing in a 74 probability that the fed will raise interest rates by another 25 basis points to a range of 450 to 475 after its meeting on february 1st according to the cme fedwatch tool but now the central bank is expected to take its fed funds rate target to 483 by may 2023 according to 30day fed funds futures a few weeks ago that terminal rate was a fraction above 5 this is reflected in the 2year treasury yield which is more sensitive to fed policy dipping on monday while longer duration bond yields inch up off recent lows us economic updates set for release on monday include the nahb homebuilders index for december due at 10 am eastern what are analysts saying “the market doesn’t believe the fed with a pricing disconnect now opening up and the market is now worried the ecb has upped its level of hawkishness… we won’t hear much from these two central banks before xmas so there is unlikely to be much official followthrough to last week’s meetings it will therefore be left to quite a full slate of data to move markets in what is likely to be a week low on liquidity” wrote jim reid strategist at deutsche bank in a morning note “the us consumer will be a big focus with consumer confidence wednesday and personal income data along with pce inflation both friday we’ll also see various housing market and business activity indicators from the us as well as japan’s cpi report and ppi numbers from europe” reid added