Treasury yields are flat as traders weigh encouraging inflation data vs. oil rebound
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- 10-year Treasury yield fell less than 1 basis point to 4.581%, while the 2-year dropped more than 2 basis points to 4.166% and the 30-year edged up less than 1 basis point to 5.104%.
- June PPI dropped 0.3% on the month, beating Dow Jones economist expectations for an unchanged reading and reinforcing a disinflation trend at the factory level.
- June CPI fell 0.4% on Tuesday, bringing its year-on-year increase to 3.5% and helping push expectations for a July Fed rate hike lower.
- Oil prices climbed above $79/barrel (WTI) and $85/barrel (Brent) after the U.S. launched fresh strikes on Iran, per U.S. Central Command.
- Chris Rupkey, chief economist at FWDBONDS, said the odds of Fed rate hikes should continue to recede as factory-level inflation trends lower and producers pass on fewer costs.
- Meghan Shue of Wilmington Trust said core inflation shows higher energy prices haven't passed through materially and tariff headwinds continue to fade, supporting a Fed cut by year-end.
Why it matters: The 10-year yield — the benchmark for mortgages, auto loans, and credit card debt — barely budged at 4.581% despite a 0.4% monthly drop in CPI, meaning consumers shouldn't expect near-term relief on borrowing costs. With oil rebounding above $79 on Iran strikes, the inflation-cooling tailwind that traders are pricing into rate-cut expectations could reverse quickly.
