Bond traders are closely monitoring an upcoming inflation report due on Tuesday, as it could provide critical insights into the Federal Reserve's future policy moves and the sustainability of the recent Treasury rally.
The rally gained momentum after Treasury yields across the curve dropped to their lowest levels since September last week. This shift followed a Democratic sweep in the midterms, which triggered a selloff in technology stocks and prompted investors to seek safer assets.
On Monday, as equities began to stabilize, the 10-year Treasury yield rose slightly to 4.88%, though it remained significantly lower than the levels above 5% seen last month. In Asian trading on Tuesday, the yield showed little change.
The inflation data is expected to test whether the Treasury rally can continue or if yields will reverse their downward trend.