Treasury yields dipped on Wednesday as investors awaited the release of U.S. inflation data for clues on the size of a potential interest rate cut from the Federal Reserve next week.
The yield on the 10-year Treasury was nearly 3 basis points lower at 3.614%, with the 2-year Treasury yield down 4 basis points at 3.565%.
Yields and prices move in opposite directions. One basis point is equivalent to 0.01%.
Market participants are anticipating the release of two key inflation reports this week. The U.S. consumer price index (CPI) data for August will be released at 8:30 a.m. ET on Wednesday, while the U.S. producer price index (PPI) report, also for August, is scheduled for release on Thursday.
The reports come ahead of the Fed’s Sept 17-18 meeting, with traders widely expecting a rate cut. The only remaining question appears to be by how much the U.S. central bank will reduce rates.
Some economists have argued the Fed should deliver a half-point rate cut next week, accusing the central bank of having previously gone “too far, too fast” with monetary policy tightening.
Others have described such a move as one that would be “very dangerous” for markets, pushing instead for the Fed to deliver a quarter-point rate cut instead.
Traders are currently pricing in a 67% chance of a 25-basis-point rate cut, with 33% expecting a 50-basis-point rate reduction, according to the CME Group’s FedWatch Tool.
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