US Treasury yields fall during the North American session on Friday following the release of US inflation data, but are poised to finish the week higher. The US 10-year Treasury yield is down one basis point to 4.951% but has gained over 16 basis points, or 3.49%, this week.
US yields cool, but the week’s inflation scare still bites
The US 30-year yield falls two basis points to 5.34% after hitting its highest level since 2007 at 5.38%, due to surging Oil prices fueled by the escalation of the US-Iran conflict, which has spread to Yemen, Houthis versus Saudi Arabia.
Recent US inflation data were mostly aligned with estimates, except for core CPI, which was in line with forecasts but ticked lower. Despite this, the red-hot PPI report a day ago and the surge in US yields this week ignited a Fed-hawkish repricing.
Money markets have priced in a 91% chance of a 0.25% rate increase by the Federal Reserve (Fed) at the next week’s meeting.
Other data showed that US consumers are becoming pessimistic about the economy and now expect higher prices due to a resurgence in fuel prices and rising trade tensions, particularly between the US and Canada.
In the meantime, the US Dollar Index (DXY), which tracks the performance of a basket of six currencies against the Greenback, clings to 99.00, up a minimal 0.05%.
US financial markets’ five-year inflation expectations are at 2.46%, up from 2.37% at the beginning of the week, according to the 5-year Breakeven Inflation Rate. The 10-year Breakeven rate rose from 2.35% to 2.4%, suggesting markets expect medium-term inflation to rise.
Traders’ focus on the Fed’s meeting, Warsh presser
Next week, traders will focus on the FOMC monetary policy decision. Alongside this, they will monitor jobs and housing data, the NY Fed Empire State Manufacturing Index, Retail Sales and Fed officials’ speeches.
US 10-year Treasury note yield
(This story was corrected on September 11 at 19:39 GMT to say that the 10-year breakeven rate rose from 2.35% to 2.4%, instead of falling.)
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