U.S. Treasury yields fall as oil retreat shifts focus to inflation data

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U.S. Treasury yields fall on oil, inflation data

Highlights

Treasury yields fall as 10-year drops over 5 basis points to 5.1937%, 30-year down 4 basis points to 5.5524%, tracking lower oil prices.
West Texas Intermediate futures for November decrease 1.49% to $92.34 amid expectations of increased Russian diesel supply from a U.S.-brokered ceasefire.
Market focus shifts to U.S. economic data with September inflation forecast at 3.7%, core CPI at 2.5%, both to influence future Fed rate decisions.

Yield moves track lower energy prices

As reported by CNBC, Treasury yields decline in Tuesday trading after oil prices pull back and investors return to the market following Monday's Columbus Day holiday closure.

The benchmark 10-year Treasury note yield falls more than 5 basis points to 5.1937%. The 30-year U.S. Treasury yield, which tends to be more sensitive to geopolitical developments, is down 4 basis points at 5.5524%, while the 2-year Treasury note yield falls more than 2 basis points to 4.7679%. One basis point equals 0.01%, and bond yields move inversely to prices.

The decline in yields follows a sharp drop in oil prices. West Texas Intermediate futures for November delivery are 1.49% lower at $92.34 a barrel by 3:50 a.m. E.T., as traders assess the prospect of increased Russian diesel supply reaching global markets after the U.S.-brokered energy ceasefire between Russia and Ukraine.

Inflation data in focus for rate outlook

Attention now turns to a heavy week of U.S. economic releases that could offer a clearer reading on inflation and the direction of interest rates.

September's annual inflation rate, due on Wednesday, is expected to come in at 3.7%, according to consensus forecasts, up from 3.4% in August. Consumer prices excluding food and energy are expected to rise 2.5% year on year, compared with 2.4% in August.

The inflation report is followed on Thursday by September's producer price index and retail sales data. Together, the releases are likely to shape market expectations for future Federal Reserve decisions and borrowing costs across mortgages, auto loans and credit cards.

Our earlier coverage of renewed investor demand for U.S. Treasuries noted that surging yields were pulling large asset managers back into government bond funds and supporting strong bidding at auctions, even after a prolonged sell-off. The piece also highlighted that many managers see 10-year maturities as offering attractive real returns versus equities or corporate credit, while remaining more cautious about longer-dated bonds due to more volatile supply-demand dynamics.

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