U.S. Treasury yields edge lower as investors await inflation data

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Highlights

The 10-year Treasury yield slipped 2 basis points to 5.195% and the 30-year yield fell 1 basis point to 5.549% as investors await September CPI data.
Economists expect September CPI to show headline inflation up 0.6% month-over-month and 3.6% year-over-year, highlighting a continued gap from the Fed's 2% target.
Wednesday’s CPI report is especially influential for Fed policy as the PCE inflation measure will not appear until after the next FOMC meeting.

September inflation data in focus

As reported by CNBC, U.S. Treasury yields are inching lower on Wednesday as markets wait for the latest consumer price inflation figures due later in the morning.

The benchmark 10-year Treasury yield is down 2 basis points at 5.195%, while the 30-year Treasury yield is 1 basis point lower at 5.549%. The 2-year Treasury note yield is also down 2 basis points at 4.772%. One basis point equals 0.01%, and bond yields move inversely to prices.

The September CPI report is expected to show headline inflation rising 0.6% on the month and 3.6% from a year earlier, based on a Dow Jones poll of economists. That annual pace would indicate price growth is moving further away from the Federal Reserve's 2% inflation target.

Core inflation, which strips out food and energy prices, is expected to rise 0.2% from August and 2.5% on an annual basis. Deutsche Bank analysts say the release arrives just two weeks before the Fed's next rates decision, making any upside or downside surprise important for market expectations.

Broader data calendar shapes rate outlook

Deutsche Bank analysts say the CPI figures are particularly significant because the Fed's preferred PCE inflation measure is not due until the day after the central bank's next decision. In their view, that leaves Wednesday's report with added influence over the policy narrative heading into the meeting.

Investors are also waiting for the September producer price index, retail sales data and weekly initial jobless claims, all scheduled for Thursday. Together, those releases are likely to provide a broader picture of inflation pressures and consumer demand in the U.S. economy.

Our earlier coverage looked at how gold and other precious metals traded in a holding pattern ahead of the U.S. CPI release, as investors recalibrated expectations for the Fed’s next moves. We noted that rate-hike probabilities and Fed officials’ comments were central to the outlook, while higher oil prices and geopolitical tension added to the broader risk backdrop influencing sentiment.

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