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Treasury yields rise as traders weigh new U.S. inflation data

An Aldi supermarket in Alhambra, California, on June 27, 2024.
Eric Thayer | Bloomberg | Getty Images

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 less than 1 basis point higher at 3.652%, with the 2-year Treasury yield last up about 3 basis points at 3.639%.

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.

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