FX.co ★ US 10-Year Yield Stabilizes Ahead of Inflation Data

On Monday, the yield on the 10-year US Treasury note steadied around 4.1%, halting a three-day decline as investors anticipated two significant inflation reports this week, which could impact the short-term interest rate outlook, especially in light of last week’s weaker employment data. Wednesday will see the release of the producer price index, followed by the consumer price index on Thursday. This comes after a drop to a five-month low in the benchmark yield on Friday, triggered by data revealing a modest increase of just 22,000 in nonfarm payrolls for August, a sharp contrast to the upwardly revised 79,000 jobs in July and market expectations of 75,000. This data highlights a weakened labor market and converges with dovish statements from Federal Open Market Committee (FOMC) officials, who have recently stressed the need for policy adjustments in response to a slowing economy and tight job market. The market has almost fully factored in a 25 basis point interest rate reduction by the Federal Reserve later this month, with some speculating on the possibility of a larger half-percentage-point cut, contingent on this week’s inflation outcomes.