Core CPI, PPI, bond yields

U.S. Treasury yields held steady on Tuesday as investors awaited two inflation reports that could influence policy decisions at the Federal Reserve.

The yield on the benchmark 10-year Treasury was 2 basis points higher at 4.053%. The 2-year yield also climbed 2 basis points to 3.515%.

One basis point equals 0.01% and yields and prices move in opposite directions.

Market participants are looking ahead to key inflation data due out later this week: the August producer price index on Wednesday, and the consumer price index on Thursday. The prints come ahead of the Fed’s Federal Open Market Committee meeting on Sept. 16-17.

Money markets are largely pricing that the Fed will cut its key interest rate by 25 basis points at next week’s meeting, according to the CME’s FedWatch tool.

Last week, a weaker-than-expected jobs report added to expectations of an imminent rate cut by the central bank. The yield on the 10-year Treasury reached its lowest level since April in the wake of the report.

“The post-payroll rally in bonds leaves 10-year yields oversold at support as we await the latest inflation data later this week,” wrote Rob Ginsberg, managing director and technical analyst at Wolfe Research, in a recent note.

“Failure to hold here would bring the April lows of 3.9% into play, but oversold at support and a higher low, our sense is that we could see a bit of a reversal before the week is over,” he added.

This week’s inflation reports also follow a sharp downward revision to U.S. job growth. Payrolls through for the year prior March were lowered by 911,000, the BLS said.