Bond yields decreased on Tuesday as traders prepared for significant economic data in the coming days.
Yield Movements
- The yield on the 2-year Treasury BX:TMUBMUSD02Y slipped 1 basis point to 4.986%. Yields move inversely to prices.
- The yield on the 10-year Treasury BX:TMUBMUSD10Y retreated 1.4 basis points to 4.276%.
- The yield on the 30-year Treasury BX:TMUBMUSD30Y fell 1 basis point to 4.366%.
Market Outlook
Trading remained cautious as investors awaited potential market-moving data catalysts within the next two days.
The U.S. consumer price index for August will be released on Wednesday, followed by the factory gate prices and retail sales reports on Thursday. These reports have the potential to impact Federal Reserve decisions regarding monetary tightening and inflation targets.
Currently, the market is pricing in a 93% probability that the Fed will maintain interest rates at a range of 5.25% to 5.50% after the upcoming meeting on Sept. 20, as per the CME FedWatch tool. The likelihood of a 25 basis point rate hike in November stands at 40%.
According to 30-day Fed Funds futures, it is expected that the central bank will not lower its Fed funds rate target to around 5% until July 2024.
Analyst Perspectives
Susannah Streeter, head of money and markets at Hargreaves Lansdown, commented, “Investors are expected to remain cautious on Wall Street while awaiting the key consumer inflation reading. Although the Fed is expected to keep interest rates unchanged this month, the forecast for future hikes is uncertain. Sentiment fluctuates as expectations for a rate rise in November decrease slightly, with policymakers becoming more cautious about potential economic slowdowns.”