US Treasury bond yields are showing positive dynamics, while market participants are preparing for the release of a new batch of US statistical data that may affect outlook for interest rates.
The yield on 5-year Treasury bonds increased by 2.1 basis points, reaching 3.468%, while the yield on 30-year bonds was 3.992% (+2.9 basis points). Meanwhile, the yield on 2-year Treasury bonds, reflecting expectations of short-term interest rates, rose by 2.2 basis points to 3.668%, while the yield on 10-year bonds increased to 3.678% (+2.5 basis points).
Markets weighed August inflation prints, with the consumer price index on Wednesday showing that prices rose 0.2% m/m, in line with expectations. Later today (at 12:30 GMT), the producer price index, which tracks inflation on a wholesale level, will be presented. Economists expect producer prices to rise by 0.1% m/m, as in July, but in annual terms, the growth rate accelerated to 2.5% per annum from 2.4% per annum. Also at 12:30 GMT, the initial jobless claims report for last week will be released, while consensus estimates suggest a slight increase - to 230 thousand from 227 thousand a week earlier. These data will appear on the eve of the next Fed meeting (September 17-18), at which a rate cut is expected. Traders are however split on how big the rate cut will be. According to the CME FedWatch Tool, markets see a 13% probability of a 0.5% rate cut in September (down from 40% the week before), and a 87% probability of a 0.25% rate cut (up from 60% the week before).