US Treasury yields tumbled across most of the curve, after cooler-than-expected inflation data prompted traders to lower their bets on the size of the tightening the Federal Reserve is likely to announce. .
Shorter-dated Treasury bond rates led the moves; the benchmark two-year note fell almost 20 basis points to 3.07%.
Swaps showed that the size of the adjustment discounted for the Fed’s September 21 decision fell to around 59 basis points, suggesting that experts consider the Fed to announce a 50 basis point hike more likely than repeat the 75 basis point increases that officials chose to implement at their last two meetings. Markets also showed that traders now expect the Fed’s benchmark index to peak around 3.5% in the early part of 2023.
The US consumer price index rose 8.5% from a year earlier, down from June’s 9.1% advance, which was the highest in four decades, according to data released on Wednesday. by the Department of Labor. Prices were unchanged from the previous month. A decrease in gasoline offset increases in food and housing costs.
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