Treasury yields hold broadly steady as investors await key inflation data
U.S. Treasury yields fluctuated slightly and were broadly unchanged in early trading Wednesday as Wall Street investors awaited key inflation data due later in the day. The 10-year Treasury yield, the benchmark most central to U.S. government financing, was little changed at 4.682%. The 2-year Treasury yield, which is closely tied to the Federal Reserve’s short-term interest-rate policy, was flat at 4.212%. The longer-term 30-year yield was steady at 5.231%. One basis point equals 0.01%. Bond yields and prices move in opposite directions. Traders are awaiting several U.S. economic reports later this week. The closely watched July Consumer Price Index is due Wednesday evening. The latest CPI report will be important for the Federal Reserve’s September policy meeting. The Fed paused its rate adjustments in August. Fed officials have continued to closely monitor the impact of rising price pressures on U.S. household consumption. At the previous policy meeting, three committee members voted against the decision in favor of a rate increase. “CPI will set the tone for the market going forward,” said Keith Buchanan, a senior portfolio manager at Global Investments. “If inflation is in line with expectations and the increase remains contained, the market should stay steady. If the data comes in above expectations, long-term Treasury yields will begin to rise.” Economists surveyed unanimously forecast that July CPI rose 0.1% month over month and that annual inflation was 3.4%. Core CPI, which excludes food and energy prices, was expected to rise 0.2% month over month, with the annual increase at 2.5%. Patrick Garvey, an ING strategist, wrote in a research note Wednesday that the rise in U.S. Treasury yields appeared on the surface to stem from geopolitical conflict and higher energy prices, but that market pricing for inflation was currently tilted toward a relatively mild outlook. The market expected July core CPI to show a 2.5% year-over-year increase, he wrote. “Breakeven inflation rates are currently below that level, creating a relatively favorable short-term market environment,” Garvey wrote. “However, the U.S. fiscal deficit continues to expand, and the trend is moving in a direction that is unfavorable for bonds.” The July Producer Price Index is due Thursday after the data fell short of expectations last month.
The 10-year Treasury yield, the benchmark most central to U.S. government financing, was little changed at 4.682%.
The 2-year Treasury yield, which is closely tied to the Federal Reserve’s short-term interest-rate policy, was flat at 4.212%. The longer-term 30-year yield was steady at 5.231%.
One basis point equals 0.01%. Bond yields and prices move in opposite directions.
Traders are awaiting several U.S. economic reports later this week. The closely watched July Consumer Price Index is due Wednesday evening.
The latest CPI report will be important for the Federal Reserve’s September policy meeting. The Fed paused its rate adjustments in August. Fed officials have continued to closely monitor the impact of rising price pressures on U.S. household consumption. At the previous policy meeting, three committee members voted against the decision in favor of a rate increase.
“CPI will set the tone for the market going forward,” said Keith Buchanan, a senior portfolio manager at Global Investments. “If inflation is in line with expectations and the increase remains contained, the market should stay steady. If the data comes in above expectations, long-term Treasury yields will begin to rise.”
Economists surveyed unanimously forecast that July CPI rose 0.1% month over month and that annual inflation was 3.4%. Core CPI, which excludes food and energy prices, was expected to rise 0.2% month over month, with the annual increase at 2.5%.
Patrick Garvey, an ING strategist, wrote in a research note Wednesday that the rise in U.S. Treasury yields appeared on the surface to stem from geopolitical conflict and higher energy prices, but that market pricing for inflation was currently tilted toward a relatively mild outlook. The market expected July core CPI to show a 2.5% year-over-year increase, he wrote.
“Breakeven inflation rates are currently below that level, creating a relatively favorable short-term market environment,” Garvey wrote. “However, the U.S. fiscal deficit continues to expand, and the trend is moving in a direction that is unfavorable for bonds.”
The July Producer Price Index is due Thursday after the data fell short of expectations last month.