U.S. Treasury Yields Fall After Volatile Week, Investors Eye Inflation Data for Rate Cut Clues
By Karen Brettell
In a week marked by volatility driven by concerns about the U.S. economic outlook, U.S. Treasury yields fell on Friday, with investors eagerly awaiting key inflation data next week to gauge the potential size of an expected September rate cut.
After a dramatic bond rally early in the week that sent yields to more than one-year lows, they have since rebounded, along with stock markets recovering from a sell-off partly attributed to the unwinding of popular dollar/yen carry trades.
Thursday's bigger-than-expected drop in jobless claims helped alleviate worries about an imminent U.S. recession, following last Friday's surprising increase in unemployment reported in the non-farms payroll data.
Looking ahead, consumer price data due on Wednesday is anticipated to show a continued decline in inflation, moving closer to the Federal Reserve's 2% target.
As Fed policymakers signal confidence in cooling inflation that may prompt interest-rate cuts, traders will closely monitor job data as a key indicator.
The odds of a 50 basis-point interest rate cut at the Fed's upcoming policy meeting in September have decreased to 55%, with a 25 basis-point cut now seen with a 45% probability.
Interest rate-sensitive two-year notes were down 1.6 basis points at 4.028%, while benchmark 10-year note yields fell 6.5 basis points to 3.932%.
Comments by Fed Chair Jerome Powell at the Jackson Hole Economic Policy Symposium later this month may offer further insights into the path of rate cuts.
Overall, the market remains cautious as it navigates through economic uncertainties and potential rate adjustments, with a focus on key data releases and central bank signals.