U.S. Treasury yields hold steady as Wall Street awaits key inflation data
Quick Look
U.S. Treasury yields remained largely unchanged on Wednesday morning as investors awaited crucial consumer price index inflation data that could influence the Federal Reserve's September policy meeting.
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Why It Matters
Investors are awaiting domestic economic data releases, specifically the consumer price index, which influences Federal Reserve interest rate policy.
U.S. Treasury yields were little changed on Wednesday morning as Wall Street awaits key inflation data due later in the session.
The yield on the 10-year U.S. Treasury note — the key benchmark for U.S. government borrowing — was largely flat at 4.682%.
The 2-year Treasury note yield, which more closely tracks short-term Federal Reserve interest rate policy, was flat at 4.212%. The longer-dated 30-year Treasury bond yield was unchanged at 5.231%.
One basis point equals 0.01%, and yields and prices move inversely to one another.
Traders are looking ahead to more domestic economic data releases this week, with a closely-watched consumer price index print for July due later on Wednesday.
The latest CPI data is expected to hold significance for the Federal Reserve's September policy meeting, as policymakers take a reprieve in August. The central bank has been focused on the impact higher pricing pressures are having on the U.S. consumer, with three dissenters at the last meeting voting to raise rates.
"CPI does set the stage," said Keith Buchanan, senior portfolio manager at Globalt Investments. "Either it's as expected and contained or not and we'll start to see the long end [of the Treasury curve] shift higher."
Economists polled by Dow Jones are expecting the July CPI reading to record a 0.1% increase month over month, with the annual inflation rate coming in at 3.4%. Core CPI, which excludes food and energy prices, is expected to show a monthly increase of 0.2% and an annual rate of 2.5%.
"While the transition to higher US yields is linked with the war and higher energy prices, in fact the market discount for inflation is quite relaxed," wrote ING strategist Padhraic Garvey in a note on Wednesday. "The July reading is expected to see core at 2.5% year-on-year."
"Break-evens are already below this, paving an auspicious path ahead. The fiscal deficit, though, has been morphing in a more bond-negative direction."
The July producer price index is also due Thursday, following a softer-than-expected print last month.
What to Watch
AI outlook — possibilities, not facts
July consumer price index print released
Very likely · Within hours
July producer price index released
Very likely · Within days
Open Questions
- What will the actual July CPI reading show?
- How will the Federal Reserve react at its September meeting?
