Treasury Yields Hold Steady as Traders Eye Cpi Inflation Data Due This Wednesday

In the morning session on Tuesday, U.S. Treasury yields displayed minimal changes as market participants braced themselves for forthcoming data releases concerning inflation and retail sales for the month of August, scheduled for Wednesday and Thursday, respectively.

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Here's a breakdown of the current yield movements:

• The yield on the 2-year Treasury (BX:TMUBMUSD02Y) increased by 2.7 basis points, reaching 5.02% compared to 4.993% recorded on Monday.
• The yield on the 10-year Treasury (BX:TMUBMUSD10Y) remained relatively stable, with a marginal adjustment from 4.287% on Monday afternoon to 4.284%.
• The 30-year Treasury yield (BX:TMUBMUSD30Y) experienced a minor decrease of less than 1 basis point, declining from 4.376% late on Monday to 4.369%.

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Market Dynamics:Market activity was characterized by cautious trading, with investors adopting a wait-and-see approach in anticipation of potentially market-moving data releases in the coming two days.

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Wednesday is slated for the release of the U.S. Consumer Price Index (CPI) data for the month of August, followed by reports on producer prices and retail sales for the same month, scheduled for Thursday. These data points collectively hold the potential to shape the Federal Reserve's perspective on the necessary monetary policy adjustments to bring inflation back to its 2% target.

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At present, financial markets are assigning a 91% probability that the Federal Reserve will maintain interest rates within the range of 5.25% to 5.50% during its meeting on September 20th, as per the CME FedWatch Tool. The likelihood of a 25-basis-point rate hike to a range of 5.5% to 5.75% at the subsequent meeting in November stands at 42.9%.

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Expert Insights:Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, remarked, "Investors are expected to stay largely treading water on Wall Street rather than taking any ambitious strokes ahead of the key consumer inflation reading."

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Streeter continued, "Although Fed policymakers are expected to sit on their hands and keep interest rates on hold this month, the forecast for another hike ahead is uncertain. Sentiment keeps oscillating with expectations of another rate rise in November decreasing a little, with policymakers thought to be more nervous about doing too much and pushing the economy into a deeper slowdown."

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