Bond yields fall ahead of key August inflation report

U.S. Treasury yields were lower on Tuesday as markets braced for another key inflation assessment that could help determine the path of rate hikes by the Federal Reserve.

Yield at scale 10 Year Treasury Note It traded at 3.314%, down nearly 5 basis points. yield on that day There was the 30-year Treasury bond 4 basis points down to 3.473%.

Meanwhile, yield on the day 2 Year Treasury It also fell over 4 basis points to 3.526%. Yields move inversely to price, and the basis point is equal to 0.01%.

On the data front, investors will watch the release of the US Consumer Price Index report for August.

Markets are pricing in a 9-in-10 chance of the Federal Reserve raising interest rates by 75 basis points for a third time next week, but bond markets are essentially signaling that markets believe the inflation trajectory is slowing.

On Monday, the New York Fed’s survey of consumer expectations showed Americans expected inflation to be 5.7% from a year earlier in August. It was 6.2% in July and the lowest since October 2021.

Prices for energy, used cars and food items have all fallen slightly. But there’s a key difference between inflation in goods and services, Cesar Perez Ruiz, chief investment officer at Picked Wealth Management, told CNBC “Capital Linkage“On Tuesday.

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“(Decreasing) goods inflation will reduce that inflation, but what we really need to look at in the numbers are two things: one is the average CPI (Consumer Price Index), and the other is core CPI. Because that services inflation — rents, continue to rise, wages continue to rise, that “We’re going to decide the main thing we’re all looking at in order to contain the risk: when, and when, the Fed is going to make the central bank,” Ruiz said. .

The wealth management firm sees general economic sentiment continuing to decline, and predicts a mild US recession and a 0.8% contraction in GDP growth in 2023.

For interest rate hikes, “our view is 75, 50, then 25 (basis points),” Ruiz added. “We don’t expect cuts next year, the main question is what’s going to make them central.”

Meanwhile, Credit Suisse is watching the Federal Reserve It halts its rate hikes sooner than expected As inflation falls, that could fuel a market rally, the bank’s chief U.S. equity strategist told CNBC on Monday.

“It’s really priced widely in the market,” Jonathan Golub said. “We all see gasoline prices going down and oil going down when we go to the gas station. We’re seeing it with food as well. So, it’s already showing up in the data. And that’s a really big potential positive.”

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