US Treasury Yields Fall as Expectations for October Rate Hike Drop

The US Treasury yields are falling today due to decreased expectations of an interest rate hike by the Federal Reserve in October. According to the latest data from LSEG, there is a 65% chance that the Fed will keep rates steady next month compared to a 55% chance before the release of the Personal Consumption Expenditures Price Index (PCE). The PCE rose 0.3% last month after a downwardly revised 0.1% gain in July. Core PCE inflation also rose 3.0% year-on-year in August, down from an estimated 3.3%. Luis Alvarado, co-head of global fixed income strategy at Wells Fargo Investment Institute, said that while the data point was lower than expected, it doesn't change the trend of inflation and the need for the Fed to act further.

The yield on benchmark US 10-year notes dropped 1.45 basis points to 5.241%, while the 30-year bond yield increased by 1.06 basis points to 5.6046%. The 2-year note yield fell to a low of 4.8267% after the data release, before dropping further to 4.837%. This follows seven consecutive days of rising yields.