U.S. Treasury Yields Ease Ahead of Key September Inflation Data

what happened

U.S. Treasury yields moved lower in Asian trading on Tuesday after markets reopened from Monday’s Columbus Day holiday. The decline was also supported by weaker oil prices. Tradeweb data showed the 10-year Treasury yield down 4.4 basis points at 5.199%, while the 30-year yield fell 4.1 basis points to 5.557%.

Both yields remain well below their 24-year peaks reached last week: 5.365% for the 10-year note and 5.733% for the 30-year bond. Investors are focused on Wednesday’s release of U.S. consumer-price inflation for September, an important indicator ahead of the Federal Reserve’s next interest-rate meeting on Oct. 28.

LSEG data put the market-implied probability of a rate increase at that meeting at 19%, while three hikes are fully priced over the coming 12 months. A Wall Street Journal survey of analysts forecasts annual headline CPI growth of 3.6% in September, up from 3.4% in August. Thierry Wizman, global FX and rates strategist at Macquarie Group, said the expected acceleration was unlikely to lead the Fed to raise rates this month.

Analysts also see early indications that the Treasury selloff could lose momentum. DZ Bank estimates the 10-year U.S. Treasury term premium at 91 basis points, matching its average since the early 1990s but representing the highest level since 2014. The bank said this, alongside expectations for less hawkish rate pricing, limits the room for yields to climb further. The information was published by Newsmetry API, citing Emese Bartha.

why it matters

Treasury yields are responding to the balance between inflation data and expectations for Federal Reserve policy. Softer rate expectations may ease pressure on longer-dated bonds, while a stronger CPI reading could sharpen scrutiny of the Oct. 28 meeting.

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