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U.S. Treasury yields slipped on Tuesday as traders awaited the August reading on consumer price inflation.
What’s happening
-
The yield on the 2-year Treasury
TMUBMUSD02Y,
3.523%
fell 9 basis points to 3.54%. -
The yield on the 10-year Treasury
TMUBMUSD10Y,
3.310%
eased 3 basis points to 3.32%. -
The yield on the 30-year Treasury
TMUBMUSD30Y,
3.471%
slipped 3 basis points to 3.49%.
What’s driving markets
The U.S. Labor Department is set to release the consumer price index for August at 8:30 a.m. Eastern, with economists polled by The Wall Street Journal expecting a 0.1% decline for the headline but a 0.3% rise for the core. Economists expect the year-over-year CPI level to dip to 8% from 8.5%.
See: Inflation is slowing, U.S. August CPI to show, but not enough to mollify a worried Fed
However, another rise in the Federal Reserve’s benchmark interest rate of 75 basis points is still expected at the central bank’s policy meeting on Sept. 20-21.
“With [St. Louis Fed President James] Bullard mentioning on Friday that a miss in CPI shouldn’t change the decision for September, I wonder if the balance of risks is skewed to an upside rather than a downside in short yields on this release,” said strategists at NatWest led by Jan Nevruzi. “If CPI underwhelms (bar a huge drop, e.g. 0% core), market has already priced in the 75bp and I think the Fed would be happy to take advantage of the pricing.”
There’s also an $18 billion 30-year bond reopening at 1 p.m.
