Treasury yields inch lower as investors look ahead to key inflation data
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- U.S. Treasury yields slipped in early Monday trade, with the 10-year and 30-year benchmarks each down just over 1 basis point and the 2-year note hovering near the flatline.
- Deutsche Bank analysts said last week's softer-than-expected July nonfarm payrolls report "reduced the urgency for further Fed tightening in the near term," driving the repricing.
- CME Group's FedWatch tool now shows traders pricing a 44% probability of a Fed rate hike at the September FOMC meeting, down from 67% one week earlier.
- July core inflation data, which excludes volatile food and energy prices, is scheduled for release Wednesday at 8:30 a.m. ET and could "go a long way towards tipping the balance for September FOMC pricing," per Deutsche Bank.
- The week's data calendar also includes Thursday's producer price index and weekly initial jobless claims, followed by Friday's July retail sales report and the preliminary University of Michigan consumer sentiment index.
Why it matters: Wednesday's core CPI print is the immediate swing factor: a hot reading could rapidly push the 44% September hike probability back toward last week's 67% level, while a soft print would lock in the dovish repricing already visible in the short end of the curve. Bond traders and Fed-watchers have a narrow window before the next leg of positioning sets in.
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