Treasury yields gained on Wednesday as Wall Street assessed a mixed consumer price index report and its implications for the Federal Reserve’s rate move next week.
The yield on the 10-year Treasury was more than 2 basis points higher at 3.668%, with the 2-year Treasury yield last up about 5 basis points at 3.658%.
Yields and prices move in opposite directions. One basis point is equivalent to 0.01%.
Consumer prices rose 0.2% and in line with expectations for August, but the monthly core inflation figure came in slightly higher than expected. Excluding food and energy prices, CPI rose 0.3% versus a Dow Jones estimate of 0.2%. Year over year, the figure rose 3.2% and in line with estimates.
The report comes 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 83% chance of a 25-basis-point rate cut, with 17% expecting a 50-basis-point rate reduction, according to the CME Group’s FedWatch Tool.