10-Year U.S Treasury Yield Falls to 4.04%
The 10-year US Treasury note yield dropped to 4.04% on Wednesday, the lowest level seen in the last five months, on softer inflation and strong demand in the last auction.
Both headline and core producer prices in the US unexpectedly dropped in August, raising hopes of disinflation for consumers.
Concerns of stubborn inflation in the US drove the FOMC to hold interest rates unchanged through the year despite growing evidence of a deteriorating labor market.
The central bank is due to restart its cutting cycle next week with a 25bps cut, although the softer PPI print and pessimistic signals from the August jobs report drove a small portion of the market to position for a 50bps cut.
Still, the yield curve continued to steepen as high inflation expectations and attacks on the Fed by the White House drove 30-year bonds to sharply underperform other maturities this year.
In turn, the latest auction of 10-year notes came through 3 basis points, signaling strong demand.
The Federal Reserve’s pace of rate cuts remains uncertain, even though its destination of an estimated neutral policy rate is clear, says PGIM’s Daleep Singh in a note.
Singh reckons the Fed is likely to ease its monetary policy gradually with 25 basis point rate cuts into the next year, until it hits the assumed neutral policy rate of 3.0%-3.5%.
“The gradual approach will provide the Fed with the time to assess tariffs’ impact on inflation, labor supply, and the effects of fiscal policy,” he says, adding that inflation is likely to remain above 3% well into 2026. The current effective federal funds rate range is set at 4.25%-4.5%. #10-Year U.S Treasury Yield Falls to 4.04% VFD Group Forecasts Q4 Profit to Settle at N2.45 Billion
