Treasury Yields Finish Mixed After Mild CPI Data and 10-Year Auction
U.S. Treasury yields finished mixed Wednesday, with the yield curve steepening. Mild July CPI data prompted traders to slightly reduce their bets that the Federal Reserve will raise interest rates more than once over the coming months. Meanwhile, the Treasury’s 10-year note auction produced its highest yield since 2007, while demand was solid. Just after 3 p.m. New York time, yields on 2- to 7-year Treasuries were down 1 to 2 basis points on the day, while longer-term yields were little changed. Treasury yields had tracked oil-price moves at times over the previous two trading sessions, but oil prices fluctuated within a limited range Wednesday and finished broadly flat. The July CPI data matched economists’ median forecast and slightly reduced market expectations for Federal Reserve rate hikes. Markets were pricing in about 11 basis points of hikes at the September meeting, about 28 basis points by year-end and about 40 basis points by mid-2027. Although the CPI data matched expectations and had a limited effect on Treasury pricing, futures trading volume surged. More than 40,000 10-year Treasury futures contracts changed hands within one minute of the data’s release, the highest one-minute volume since the minute after the July employment report was released on August 7. Total futures volume for the day, however, was close to its 20-day average. The Treasury’s 10-year note auction stopped at a yield of 4.683%, the highest since 2007, but only slightly above the when-issued level at the 1 p.m. New York time bidding deadline. The auction was supported by the recent steepening of the 2s10s yield curve. The spread approached 49 basis points, its widest since mid-May. As of 4:15 p.m. Eastern time, the 2-year Treasury yield was 4.2032%; the 5-year yield was 4.38%; the 10-year yield was 4.6884%; and the 30-year yield was 5.2521%. The spread between 5- and 30-year yields was 87.04 basis points, while the 2s10s spread was 48.31 basis points.
Just after 3 p.m. New York time, yields on 2- to 7-year Treasuries were down 1 to 2 basis points on the day, while longer-term yields were little changed. Treasury yields had tracked oil-price moves at times over the previous two trading sessions, but oil prices fluctuated within a limited range Wednesday and finished broadly flat.
The July CPI data matched economists’ median forecast and slightly reduced market expectations for Federal Reserve rate hikes. Markets were pricing in about 11 basis points of hikes at the September meeting, about 28 basis points by year-end and about 40 basis points by mid-2027.
Although the CPI data matched expectations and had a limited effect on Treasury pricing, futures trading volume surged. More than 40,000 10-year Treasury futures contracts changed hands within one minute of the data’s release, the highest one-minute volume since the minute after the July employment report was released on August 7. Total futures volume for the day, however, was close to its 20-day average.
The Treasury’s 10-year note auction stopped at a yield of 4.683%, the highest since 2007, but only slightly above the when-issued level at the 1 p.m. New York time bidding deadline.
The auction was supported by the recent steepening of the 2s10s yield curve. The spread approached 49 basis points, its widest since mid-May.
As of 4:15 p.m. Eastern time, the 2-year Treasury yield was 4.2032%; the 5-year yield was 4.38%; the 10-year yield was 4.6884%; and the 30-year yield was 5.2521%. The spread between 5- and 30-year yields was 87.04 basis points, while the 2s10s spread was 48.31 basis points.