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US Treasury yields rebound as markets await Fed rate decision

Yields are set for their biggest monthly jump since March on 10-year and 30-year notes, with money markets pricing a roughly 32% chance of a 25-basis-point hike.

Reported · Written up by our desk · Central Banks

US Treasury yields reversed a three-day losing streak as Wall Street looked ahead to the Federal Reserve’s upcoming interest rate decision and the subsequent press conference with Chair Kevin Warsh, LiveMint Markets reported.

Although yields had fallen from July highs, they are still positioned for a sharp monthly increase, driven by growing inflation concerns tied to higher oil prices. The 10-year and 30-year yields are set for their biggest monthly jump since March, and the 2-year yield is headed for a fifth straight monthly rise, according to the report.

Markets largely expect the Fed to hold rates unchanged, but CME FedWatch Tool data cited by LiveMint showed traders still see about a 32% chance of a 25-basis-point rate hike. Traders are also fully pricing in a September hike, with an additional move by year-end implied by a 71.2% probability, based on LSEG-compiled data.

The article also points to recent economic and inflation-linked signals, including cooling labor market indicators from June jobs data and a slower-than-expected consumer inflation reading alongside earlier crude oil declines. It notes that both one- and five-year inflation swaps have declined in recent weeks, suggesting investors do not expect inflation to rise materially or stay high over the medium term.

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