Treasury Yields Slip as July Inflation Data Aligns with Expectations

Wall Street saw the benchmark 10-year Treasury yield fall by several basis points on Wednesday, settling around the mid-4% range (4.62%-4.66%). The two-year note slipped to just above 4.1%. The moves followed the Labor Department’s CPI for July matching forecasts and a flat month-over-month PPI, signaling easing price pressures and reducing urgency for further rate hikes.

Treasury Yields Ease From Multi-Week Highs as Investors Await Key U.S. Inflation Data

The Federal Reserve’s policy stance has been shaped by aggressive rate increases that pushed the federal-funds target to a 23-year high. Inflation remains above the Fed’s 2% goal, keeping markets focused on each CPI release for clues on the September policy decision. Earlier this month, a $42 billion auction of 10-year notes posted the highest yield since 2007, reflecting demand for higher compensation amid large deficits and solid growth.

Treasury Yields Ease From Multi-Week Highs as Investors Await Key U.S. Inflation Data

• 10-year Treasury yield: reported at 4.621%, 4.654% (CNBC later), and 4.683% at the recent auction.

CNBC

• 2-year Treasury yield: fell to 4.134% and 4.178% (CNBC later), with Bloomberg noting a level near 4.2% before a dip to 4.18% in Asian trading.

CNBC

• 30-year Treasury yield: around 5.19% and 5.217% (CNBC later).

CNBC

• July CPI (headline): +0.2% month-over-month, +2.5% year-over-year, the slowest pace since March 2021.

Treasury Yields Ease From Multi-Week Highs as Investors Await Key U.S. Inflation Data

• July core CPI (ex-food & energy): +0.2% month-over-month.

Treasury Yields Ease From Multi-Week Highs as Investors Await Key U.S. Inflation Data

• PPI: flat month-over-month, contrary to a 0.2% rise expected by economists.

Treasury Yields Ease From Multi-Week Highs as Investors Await Key U.S. Inflation Data

Gregory Faranello of AmeriVet Securities noted that large deficits, solid growth, and geopolitical tensions keep yields elevated. Aviva Investors’ senior fixed-income manager Steve Ryder said the data sustains expectations for a September rate hike but does not create immediate pressure on the Fed. Natixis North America chief economist Christopher Hodge argued that upcoming data and the September meeting will shape policy, though he believes the Fed can narrowly avoid another hike.

Bloomberg

• “Net, net, pipeline pressures at the lower stages of production are not adding to the inflation risks the consumer faces,” — Chris Rupkey, FWDBONDS chief economist

CNBC

• “It’s still hard for yields to come down with outsize deficits, growth running solid, the war and inflation running above the Fed’s target,” — Gregory Faranello, head of US rates trading and strategy for AmeriVet Securities

Bloomberg

• “While the data should keep September rate hike expectations alive, it also provides little urgency for the Fed to act immediately,” — Steve Ryder, senior fixed income portfolio manager at Aviva Investors

Bloomberg

Sources differ on the exact level of the 10-year yield after the latest data: CNBC cites 4.621% and 4.654%, while Bloomberg reports an auction yield of 4.683%. The two-year yield is similarly reported at 4.134% and 4.178% (CNBC later) versus Bloomberg’s “just under 4.2%” figure. No source provides a definitive post-market closing level, leaving a small gap in precise pricing.

Bloomberg

Market participants will watch the Fed’s September policy meeting and the Jackson Hole symposium later this month for any signals on the timing of rate adjustments. Analysts expect the next CPI and employment reports in August to further influence yield trajectories and the probability of a rate change.

Treasury Yields Ease From Multi-Week Highs as Investors Await Key U.S. Inflation Data