Treasury yields dip as Wall Street awaits wholesale inflation data

• July PPI expected to rise 0.2% month-over-month, with release scheduled for 8:30 a.m. ET Thursday
• July CPI came in at 0.1% monthly increase, matching expectations and marking the second consecutive encouraging inflation report
• Goldman Sachs analysts suggest Fed voters would likely wait for August inflation data before deciding on a September rate hike

Summary

Market Movement:

U.S. Treasury yields declined Thursday morning as investors awaited July wholesale inflation data. The benchmark 10-year note yield fell over 1 basis point to 4.674%, while the 2-year yield dropped more than 2 basis points to 4.176%. The 30-year yield declined 1 basis point to 5.236%.

Key Data Point:

The July Producer Price Index (PPI) was scheduled for release at 8:30 a.m. ET, with Dow Jones economists forecasting a 0.2% month-over-month increase. The PPI measures wholesale prices for raw goods and materials, providing insight into inflation pressures.

Recent Inflation Context:

The PPI release followed Wednesday's Consumer Price Index (CPI) report, which showed a 0.1% monthly increase for July—matching consensus expectations. This marked the second consecutive relatively moderate core inflation reading, prompting traders to reduce expectations for a Federal Reserve rate hike in September.

Market Implications:

Goldman Sachs indicated that most Federal Open Market Committee (FOMC) voters would likely view the July inflation figures as acceptable but would want to review August data before deciding on a September rate hike. Deutsche Bank analyst Jim Reid noted that the in-line inflation readings, combined with weaker employment data from the previous week, reduced immediate pressure on the Fed to act in September.

Outlook:

The consecutive moderate inflation reports suggest easing price pressures, potentially giving the Federal Reserve flexibility in its monetary policy decisions. Market participants are closely monitoring upcoming economic data to gauge the central bank's next moves.