Recent data showing a decrease in the core consumer price index for December has provided some relief to bond investors, as it suggests a potential easing of inflationary pressures. This development has contributed to a drop in US bond volatility, reaching its lowest level in nearly a month. However, UBS strategists caution that the persistent rise in bond yields since September indicates that financial conditions have not tightened enough to reverse the ongoing selloff. This suggests that despite the lower volatility, yields could continue to rise, as current levels have not yet attracted sufficient investor demand.
The TNX, which tracks the yield on 10-year US Treasury notes, is currently at 4.61 as of 13:41 on January 16, slightly down from its last close of 4.65. The bond market's stabilization, reflected in the reduced volatility, has not yet translated into a significant shift in investor sentiment, as higher yields continue to pose challenges for corporate financing by increasing borrowing costs.