FX.co ★ US 10-Year Yield Eases Ahead of PPI Data

The yield on the 10-year US Treasury note edged down to around 4.68% on Thursday as investors awaited July’s producer price data for additional insight into inflation trends. On Wednesday, official figures showed US consumer inflation easing for a second straight month to 3.4% year-on-year in July, with prices rising just 0.1% from June. Following the release, markets lowered the implied probability of a 25-basis-point Federal Reserve rate hike in September to about 40%, from nearly 50% the previous day. At the same time, the government’s latest 10-year note auction cleared at a yield of 4.683%, the highest level since the global financial crisis. Persistently above-target inflation and widening budget deficits continue to support elevated long-term yields, as investors demand higher compensation to fund US government borrowing.