US Treasury Yields Ease Amid Rising Inflation Expectations
US Treasury yields have eased slightly following the release of inflation data, but the risk of a Federal Reserve rate hike remains high. The US 10-year yield slipped by one basis point to 4.951%, while the 30-year yield fell two basis points to 5.34% after hitting its highest level since 2007.
The easing in yields is attributed to the inflation data, which was mostly in line with estimates except for core CPI, which ticked lower. However, the recent red-hot PPI report and the surge in US yields this week have ignited a Fed-hawkish repricing.
Money markets now price in a 91% chance of a 0.25% rate increase by the Federal Reserve at the September 15-16 meeting. This is driven by rising inflation expectations, with five-year breakeven inflation rate increasing to 2.46% and 10-year breakeven rate falling to 2.4%