Treasury yields rose slightly on Tuesday as investors awaited inflation data that could affect the Federal Reserve’s decision to raise interest rates. The consumer price index, scheduled to be released on Wednesday, is expected to show monthly core inflation of 0.2% in August, the same as in July. On an annual basis, the inflation rate is expected to drop to 4.3% from 4.7% last month. Producer price indices and retail sales are also expected to be released on Thursday, which will influence Federal Reserve policymakers ahead of their meeting on Sept.
Despite the expectation of a possible rate hike in the near future, experts believe that the market expects the Federal Reserve to maintain the current level of interest. The yield on the two-year Treasury note exceeded the 5% threshold, signaling expectations of higher interest rates. However, futures project that the Fed’s overnight lending rate will remain above 5% until June 2024. Futures also suggest that the Fed will not make significant rate cuts until July 2022, indicating a long during the higher rate.
David Petrosinelli, a veteran fixed income trader, raised concerns about rising oil prices and continuing student loan payments, which could put a strain on consumers’ finances. US crude oil prices rose above $89 a barrel on Tuesday, hitting a 10-month high. Additionally, the National Federation of Independent Businesses reported a decline in small business sentiment due to continued concerns about inflation and the quality of the workforce.
In conclusion, although Treasury yields rose slightly, reflecting cautious optimism in the market, experts believe that the Federal Reserve is unlikely to raise interest rates at its next meeting. Inflation data and economic indicators play an important role in the decision-making process of Federal Reserve officials.