Bond Yields Steady as Investors Eye Inflation Data, Fed Rate Decision
U.S. Treasury yields held steady Tuesday as market participants awaited key inflation reports expected to influence the Federal Reserve’s upcoming policy meeting.The yield on the benchmark 10-year Treasury was 2 basis points higher at 4.053%, while the 2-year yield climbed 2 basis points to 3.515%. One basis point equals 0.01%, and yields and prices move inversely.
Investors are focused on the August producer price index (PPI), scheduled for release Wednesday, and the consumer price index (CPI) on Thursday. These reports precede the Fed’s Federal Open Market Committee meeting on September 16-17.
According to the CME’s FedWatch tool, money markets are largely pricing in a 25 basis point cut to the Fed’s key interest rate at next week’s meeting.Expectations for a rate cut were bolstered last week by a weaker-than-expected jobs report. following the jobs data, the 10-year Treasury yield reached its lowest level since April.
“The post-payroll rally in bonds leaves 10-year yields oversold at support as we await the latest inflation data later this week,” noted Rob Ginsberg, managing director and technical analyst at Wolfe Research. “failure to hold here would bring the April lows of 3.9% into play, but oversold at support and a higher low, our sense is that we could see a bit of a reversal before the week is over.”
The inflation reports arrive alongside news of a significant downward revision to U.S. job growth figures. The bureau of Labor Statistics (BLS) recently lowered payrolls through the year prior to March by 911,000.
