US 10Y TREASURY: driven by inflation

13 oct

The inflation data were the ones that the market was watching closely during the previous week. The September inflation came just a bit higher from the market estimate. While core inflation remained elevated at 0,3% for the month and 3,3% for the year, the inflation figures were standing at 0,2% in September and 2,4% for the year. As inflation is holding modestly above Feds target of 2,0%, the markets are anticipating the next Feds move. Whether they will cut in November or maybe, the next cut will be postponed for December. This question came after the Atlanta Fed President Bostic noted in an interview that the higher inflation data might impact his opinion to skip a rate cut in November.

The US Treasury yields reacted accordingly during the previous week, where 10Y US yields were pushed to the levels above the key 4,0% level. The highest weekly yields reached were at 4,1%, however, they slipped modestly toward the 4,073% at Friday's trading session. As the market is digesting the latest inflation, it should be expected for yields to calm down a bit in the week ahead. The next target of markets might be to test levels below the 4,0%, where 3,9% or even 3,8% might be the next targets.