Treasury yields fall as investors digest latest inflation data
At 5:18 a.m., the 10-year Treasury yield was down over three basis points to 4.255%, while the 2-year Treasury yield was over one basis point lower at 3.711%. The 30-year Treasury bond yield was over 4 basis points down to 4.841%.
One basis point is equal to 0.01%, and yields and prices move in opposite directions.
Investors were relieved after July's inflation reading came in tamer than expected, calming fears that tariffs are not causing prices to accelerate. Traders are now pricing in a nearly 96% chance of a rate cut at the Federal Reserve's September meeting, according to CME's FedWatch Tool.
"When it comes to analysing the tariff impact, it's also worth noting that the effective tariff rate has fluctuated significantly in recent months, and hasn't moved up in a straight line, so that's also making it trickier to gauge the full impact," Deutsche Bank analysts said in a note.
"So when it comes to the impact on inflation, it may be some time before we get a clear signal, as several tariffs were imposed as recently as August 7, whilst there are potentially more in the pipeline like pharmaceuticals and semiconductors," they added.
The inflation report comes ahead of the Fed's meeting in Jackson Hole, Wyoming, from Aug. 21-23, and could help shape monetary policy decisions.
Investors will now turn their attention to the producer price index on Thursday, which will show how much producers are charging wholesalers or retailers before it reaches the consumer.
Other economic data investors will keep an eye out for this week include July's retail sales data on Friday and the Michigan Consumer Sentiment.
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