Treasury yields fell on Tuesday as wholesale inflation measure came in softer than expected.
The yield on the 10-year Treasury was lower by about 2 basis points at 3.89%. The 2-year Treasury yield was last down by 2 basis points at 3.99%.
Yields and prices move in opposite directions. one basis point equals 0.01%.
The producer price index, which measures selling prices that producers get for goods and services, increased 0.1% on the month, the Labor Department’s Bureau of Labor Statistics reported Tuesday. Excluding volatile food and energy components, core PPI was flat.
“There isn’t anything in this data that would suggest the Fed will have any hesitation cutting rates next month,” Ian Lyngen, BMO’s head of U.S. rates, said in a note. “That said, tomorrow’s consumer inflation update is far more relevant to near-term policy expectations.”
The PPI is the first of the two key inflation reports this week, with the consumer price index due on Wednesday. Investors are watching both sets of data closely for hints about the state of the economy, especially as concerns about whether the U.S. could be entering a recession have caused market jitters in recent weeks.
The data could also provide hints about whether the Federal Reserve is likely to cut interest rates when it meets in September. At its July meeting, the central bank left rates unchanged, but indicated that depending on how inflation and the labor market develop, a cut could come in September.
Following recent market turmoil and economic uncertainty, questions have also emerged about whether the Fed should have already started cutting rates to avoid a hard landing. Markets are widely expecting a September rate cut, but traders have appeared split on how big they expect the cut to be.