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Bond Report: Treasury yields edge up ahead of Tuesday’s CPI inflation data for November

Two- and 10-year Treasury yields continued to inch higher Monday afternoon following a pair of government-debt auctions that produced lackluster demand.

What’s happening

  • The yield on the 2-year Treasury  BX:TMUBMUSD02Y  rose 1.5 basis points to 4.740% from 4.725% on Friday. Yields move in the opposite direction to prices.
  • The yield on the 10-year Treasury BX:TMUBMUSD10Y advanced 1.9 basis points to 4.263% from 4.244% Friday afternoon.
  • The yield on the 30-year Treasury BX:TMUBMUSD30Y rose 2.5 basis points to 4.350% from 4.325% late Friday.

What’s driving markets

U.S. government debt continued to sell off after two auctions on Monday. Treasury’s $37 billion sale of 10-year debt came in weak, while a $50 billion sale of 3-year notes was met with poor demand.

One last round of consumer price data is set to be released on Tuesday. November’s CPI is expected by economists to show softer headline inflation, but a firmer core reading after stripping out food and energy prices.

On Wednesday, Federal Reserve policy makers are expected to hold interest rates steady between 5.25%-5.5%, though investors will carefully monitor comments from Chair Jerome Powell.

Last Friday’s strong jobs data has prompted traders to push back on expectations for the first Federal Reserve interest-rate cut next year. Fed-funds futures traders now see a 39.9% chance of at least a 25-basis-point cut by March, down from 57.4% a week ago, according to the CME FedWatch Tool.

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