FX.co ★ US 10-Year Yield Swings Lower after PPI

The yield on the 10-year US Treasury note fell to 4.07% on Wednesday, closely approaching the five-month low of 4.04% reached in the previous session. This decline was attributed to recent indicators demonstrating a slower rate of price growth. In August, both headline and core producer prices in the United States unexpectedly decreased, and the figures from the previous month were revised downward. This development has raised hopes for disinflation benefiting consumers. Despite accumulating evidence of a weakening labor market, persistent inflation concerns have led the Federal Open Market Committee (FOMC) to maintain interest rates steady throughout the year. The central bank is anticipated to initiate its rate-cutting cycle next week with a 25 basis points reduction. However, the unexpectedly low Producer Price Index (PPI) figures along with discouraging insights from the August employment report have led a minority in the market to speculate on a potential 50 basis points cut. Consequently, the yield curve has continued to steepen, as heightened inflation expectations and criticism from the White House targeting the Federal Reserve have contributed to the significant underperformance of 30-year bonds in comparison to other maturities this year.