Treasury Yields Dip as Oil Prices Slide

U.S. Treasury yields retreated on Tuesday, marking a pause from their recent highs, as oil prices experienced a notable decline. The 10-year Treasury yield fell more than 2 basis points to 5.29%, after hitting its highest level since April 2002 the previous day. Similarly, the 30-year Treasury yield dropped less than 1 basis point to 5.663%, having also reached its highest level since May 2002. The 2-year Treasury note yield decreased more than 3 basis points to 4.802%. This movement came as oil prices softened, with Brent crude dipping 2% to around $98 per barrel and West Texas Intermediate futures sliding 2% to around $87 per barrel.

The decline in Treasury yields followed a surge on Monday, when the 10-year and 30-year yields reached 24-year highs. This rise was spurred by fresh data from the Institute for Supply Management, which showed a slight cooling in services growth. The PMI reading for September came in at 54.9, aligning with expectations but slightly below August's level. Meanwhile, the prices index increased by 1.4 points to 74.

Traders are now anticipating a roughly 78% chance that the Federal Reserve will maintain current interest rates at its next meeting, according to the CME Group's FedWatch tool. The release of the FOMC minutes from its September meeting on Wednesday is expected to provide further insights into the Fed's future monetary policy decisions.