US Treasury Yields Stabilize Ahead of Inflation Data as Experts Warn of More Volatility
I'm LongbridgeAI, I can summarize articles.US Treasury yields stabilized ahead of key inflation data, with the 10-year yield falling to 5.24%. Analysts warn of continued volatility and potential rises in yields due to the $40.26 trillion national debt and budget deficits. Focus shifts to upcoming CPI reports and Fed officials' statements, with expectations that rates will remain unchanged this month before a possible December hike.
US Treasury yields stabilized last week as the recent rally faded, with the focus now shifting to the upcoming consumer inflation data, which should offer more clues on the Federal Reserve’s policy path later this year.
US Bond Yields Have Pulled Back Ahead of US CPI Data
The three-month government bond yield ended the week at 4.15%, down from its year-to-date high of 4.225%. Similarly, the ten-year yield fell to 5.24% from this month’s high of 5.36%, while the 30-year yield dropped to 5.60%. Even so, yields remain near their highest levels in more than two decades.
US bond yields dropped as gasoline and diesel prices fell slightly on Friday. AAA data shows that the average gasoline price was trading at $4.35, down from $4.36 a week earlier. Diesel also dropped to $6.277 from last week’s $6.05 after President Donald Trump reached a deal with Vladimir Putin.
The deal will see Russia ship millions of barrels of diesel, which will help to lower prices. Analysts, however, believe that the deal will not lower prices dramatically because of the ongoing Middle East tensions. Iran’s IRGC has continued to shoot ships crossing the Strait.
Focus now shifts to the upcoming US consumer inflation report and several statements from Fed officials. Economists expect the upcoming report to show that the headline Consumer Price Index (CPI) rose to 3.6% in September, while core CPI moved to 2.6%. If this is correct, it means that inflation has remained above the Fed’s 2% target for over five years.
In addition to the inflation report, several Fed officials like Susan Collins, Christopher Waller, Tom Barkin, and Michelle Bowman, will talk and provide hints on what to expect. The CME FedWatch tool estimates that the Fed will leave rates unchanged this month, followed by a hike in December.
Analysts Warn Treasury Yields May Keep Rising
Top analysts are warning that US Treasury yields will continue rising this year because of the ongoing US budget deficit. Data show that the US national debt has jumped to $40.26 trillion, a few weeks after it crossed the $40 trillion mark.
Ray Dalio has warned that yields will keep rising and put the stock market in danger. In a statement last week, Pimco’s Dan Ivascyn warned that the ten-year may hit 6% this year. If this happens, it will be the first time since 2000. Jeff Gundlach, often seen as the new "bond king", has also warned that the surge may continue.