NEW YORK- Longer-dated US Treasury yields fell on Tuesday and an inversion in a key part of the yield curve deepened as investors awaited inflation data on Wednesday for further clues on whether price pressures are abating.
Federal Reserve officials have indicated they expect to hike interest rates by at least another 50 basis points as they tackle persistent price pressures, but traders are only pricing in approximately 35 basis points of further tightening.
Investors are watching to see whether the 10-year Treasury yield moves definitively above the 4 percent level, which may occur if it appears that inflation pressures will continue.
“We’re trying to make the decision here – 4 percent take it or leave it … but right here people are not willing to risk too much in front of the CPI,” said Lou Brien, market strategist at DRW Trading in Chicago.
Tighter monetary policy would eventually lead longer-dated yields lower as investors worry about the impact on growth, Brien said, “but right in here the market doesn’t really know exactly when that time is going to be.”
