Treasuries-US yields fall ahead of Fed interest rate decision

On the 30-year bond US30YT=RR, the yield fell 1.7 basis points to 5.346%. A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes US2US10=TWEB, seen as an indicator of economic expectations, was at a positive 34.2 basis points. The two-year US2YT=RR U.S. Treasury yield, which typically moves in step with interest rate expectations for the Fed, fell 3.6 basis points to 4.627%. The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities (TIPS) US5YTIP=TWEB was last at 2.395% after closing at 2.417% on Tuesday. The 10-year TIPS breakeven rate US10YTIP=TWEB was last at 2.368%, indicating the market sees inflation averaging about 2.4% a year for the next decade. The benchmark U.S. 10-year Treasury yield eased on Wednesday, with oil prices also down, ahead of what could be the first interest rate hike from the Federal Reserve since 2023. Yields held declines following data showing U.S. retail sales rebounded more than expected in August and that U.S. import prices surged last month. But the key event of the day is likely to be the Fed's decision, due this afternoon, with the U.S. central bank widely expected to announce at least a 25-basis-point rate increase in an effort to combat persistent inflation. The recent rise in yields, along with stubbornly high inflation, will put the spotlight on how Federal Reserve Chairman Kevin Warsh describes the first monetary policy change on his watch. Markets were last pricing in about a 93% chance for a hike of at least 25 bps, according to CME FedWatch, up from about 60% a week ago. Worries about inflation, which have been driven in part by spikes in oil prices tied to the U.S.-Israeli conflict with Iran, pushed the 10-year yield above 5.00% on Monday for the first time since 2023, and the benchmark yield hit its highest level on Tuesday since July 2007. The yield on the U.S. 10-year Treasury note US10YT=RR was last down 2.5 basis points at 4.971%. Oil prices fell as reports that Saudi Arabia was offering additional crude cargoes via Oman eased concerns about the scale of Middle East supply disruptions. Wednesday's economic data reinforced the view that the U.S. economy remains resilient. Boosting retail sales were purchases of motor vehicles and supplies for the new school year. Commerce Department data showed retail sales jumped 1.2% last month after a revised 0.5% drop in July, which was the first decline in nine months. Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, rebounding 0.8% after a previously reported 0.6% drop in July. At the same time, Labor Department data showed that import prices rebounded 0.7% last month after declining by 0.3% for two straight months. Economists polled by Reuters had forecast import prices, which exclude tariffs, would rise 0.4%.

Treasuries-US yields fall ahead of Fed interest rate decision

Curve and inflation breakevens

Yields ease before Fed decision

Inflation concerns and oil prices weigh on bonds

Retail sales and import prices reinforce resilience

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