10-Year Treasury Yield Eases to 4.05% Ahead of Inflation Reports

Lead: On Monday in New York, the yield on the 10-year U.S. Treasury note fell to 4.05%, down 3 basis points from the prior session, as investors braced for key inflation data later this week.

Nut Graf: This modest pullback ends a brief three-day decline and underscores market caution ahead of Wednesday’s Producer Price Index and Thursday’s Consumer Price Index releases, which could sway expectations for Federal Reserve rate cuts.

Key Metrics

  • Yield on 10-year note: 4.05% (-0.03 ppt)
  • Previous session: 4.08%
  • Month-to-date change: -0.24 ppt
  • Year-over-year change: +0.35 ppt

Market Drivers

Investors have bid up bond prices-and driven yields lower-after August’s nonfarm payrolls report showed only 22,000 jobs added, well below forecasts. Dovish commentary from Fed officials and a slowing labor market have intensified speculation of a 25-basis-point cut at the Fed’s Sept. 16-17 meeting, with some traders even factoring in a half-point move.

Outlook for Inflation and Fed Policy

  • Producer Price Index (PPI): Due Wednesday, with analysts watching for further evidence of easing price pressures.
  • Consumer Price Index (CPI): Due Thursday; core CPI is forecast to rise 0.3% month-over-month, excluding food and energy.
  • Fed rate bets: Markets have nearly priced in a quarter-point cut later this month, though a larger move remains possible if inflation cools faster than expected.

While the 10-year yield steadied, short-term Treasury rates have also shifted on similar expectations. The spread between 10- and 2-year yields has rebounded, reflecting renewed confidence in an eventual Fed easing cycle.

Short, data-driven shifts in Treasury yields will continue to be monitored closely as the Federal Reserve prepares to decide on its next policy move later this month.