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Treasury yields wobble after CPI, Fed hike odds dip below 50%
Markets trimmed the probability of a next-month Fed rate hike to just under 50% after CPI, while the government still sold 10-year debt at the highest yield in nearly 20 years.
Bond markets took a cautious breather after the July consumer inflation report showed headline and core annual rates ticking down as expected, though the monthly core price increase came in hotter than forecast, Reuters noted in Yahoo Finance’s market wrap.
Interest rate markets eased, pushing the odds of a Federal Reserve rate hike next month to just below 50%, and supporting short-term Treasuries. The relief was tempered by funding pressure, with the Treasury auction of 10-year notes clearing at the highest yield in almost 20 years, and the curve from two to 30 years steepening slightly.
Investors also looked ahead to additional inflation data that could influence the Fed’s next steps, with the producer price report due as it includes components used in the central bank’s favored PCE gauge, such as airfares. Both core and headline PCE inflation are expected to have stayed above 3% in July, and analysts flagged that a rebound in oil prices could lift August inflation readings before the Fed’s September meeting.
In energy markets, Brent crude hovered under $90 per barrel amid an ongoing impasse in the Gulf, while Japan’s wholesale inflation held above 7% year over year in July. Broader markets remained largely range-bound into August, with major indexes little changed and Wall Street near records after recent earnings momentum in AI-related firms.
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