10-year Treasury yield moves lower after weak housing data

The 10-year Treasury note yield fell on Tuesday as investors digested more economic data and continued to assess the inflationary backdrop ahead of the Federal Reserve's interest rate decision next week.

The benchmark yield was down more than 1 basis point at 5.123%, while the 30-year Treasury bond fell more than 3 basis points to 5.44%. Meanwhile, the 2-year Treasury note yield was down more than 2 basis points at 4.783%.

One basis point is equal to 0.01%, and yields and prices move in opposite directions.

Yields initially moved lower after housing starts for September missed expectations, coming in at 1.22 million versus the 1.3 million that economists polled by Dow Jones called for. September's reading marked a 5.2% decrease from August's revised estimate.

"The weakness in housing starts is not surprising given the surveys showing deep pessimism on the part of homebuilders given the shortage of labor from Washington's immigration policies and the geopolitical risks kicking up inflation and the cost of building materials," said Chris Rupkey, chief economist at FWDBONDS. "It is not winter yet but housing is going into a deep freeze."

Investors are awaiting other economic data releases this week, including Thursday's release of weekly initial jobless claims.

This comes ahead of the Federal Reserve's next interest rate decision, due next week. The latest figures for the Fed's preferred inflation gauge, the personal consumption expenditures index, will also be released next week.

Traders are now pricing in an 85% chance of the Fed holding interest rates steady, according to the CME FedWatch Tool. That's up from 42.4% a month ago.

Concerns surrounding inflation have been exacerbated by a rise in crude oil prices following the start of the conflict in the Middle East earlier this year. On Tuesday, however, oil pulled back slightly, with West Texas Intermediate crude futures shedding more than 1% to around $102 per barrel and Brent crude futures declining more than 2% to around $106.