Treasury yields in focus as investors await inflation data

The U.S. 10-year Treasury was flat on Wednesday as investors awaited a key U.S. inflation report due later in the week.

The yield on the 10-year Treasury was unchanged at 3.833%. The yield on the 2-year Treasury was also flat at 3.861%.

Yields and prices move in opposite directions. One basis point equals 0.01%.

Market participants are looking ahead to the release of U.S. personal consumption expenditures (PCE) data on Friday to get a better picture on the health of the world’s largest economy. Federal Reserve officials use the PCE measure as their main baseline to gauge inflation.

It comes after Fed Chair Jerome Powell said late last week that “the time has come for policy to adjust,” bolstering expectations for a rate cut at the central bank’s next meeting. Powell declined to provide exact indications on the timing or extent of the cut, however.

“The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks,” Powell said Friday in his keynote address at the Fed’s annual retreat in Jackson Hole.

Market participants are firmly pricing in a rate cut at the Fed’s Sept. 18 meeting. Traders are currently pricing in a roughly 63.5% chance of a 25-basis-point rate cut next month, with 36.5% pricing in a 50-basis-point rate cut, according to the CME Group’s FedWatch Tool.