Treasury Yields, European Government Bond Yields Fall Ahead of U.S. Inflation Data — Update

By Emese Bartha

Yields on Treasurys, eurozone and U.K. government bonds fell in European morning trade on Wednesday ahead of U.S. consumer-price inflation data for September.

The data, due at 1230 GMT, will provide key information for markets ahead of the Federal Reserve's next interest-rate decision on Oct. 28. However, inflation isn't expected to be high enough to prompt the Fed to hike rates again this month following a 25-basis-point increase in September.

Oil prices erased earlier gains, albeit staying at elevated levels, with Brent crude last down 0.2% at $105.51 a barrel.

"Bonds are given some respite after their weeks-long [price] decline," KBC Bank analysts said in a note.

The two-year Treasury yield fell 1.9 basis points to 4.773%, while the 10-year Treasury yield declined 2.3 basis points to 5.194%, according to Tradeweb. The 30-year yield eased 1.6 basis points to 5.547%.

"Our baseline continues to be that the Fed skips a hike later this month, while hiking again in December," BeiChen Lin, senior investment strategist at Russell Investments, said in a note.

Eurozone yields tracked moves in Treasury yields, with the 10-year German Bund yield down 1.3 basis points at 3.450%.

U.K. government bonds, known as gilts, outperformed, with the 10-year yield dropping 5.3 basis points to 5.839%. The move came after Bank of England chief economist Huw Pill expressed doubt that the four quarter-point interest-rate hikes that markets are currently pricing in will be needed to contain inflation.

Analysts in The Wall Street Journal's poll expect the U.S. data to show headline annual CPI inflation accelerating to 3.6% in September, from 3.4% in August. Core inflation, which strips out volatile items such as food and energy, is expected to edge up to 2.5% in September from 2.4% in August.

If inflation rises more than expected amid a backdrop of a market already anxious about price pressures, the market could question expectations that the Fed will leave rates unchanged in October, as well as reassessing how much rates will rise after that, Russell Investments' Lin said.

Money markets price in a high 78% probability of unchanged Fed interest rates this month, according to LSEG.

New York Fed President John Williams Tuesday reiterated that the Fed might need another 25-basis-point hike this year but said to Bloomberg: "I don't think at this time I have any reason to believe that we would need to do ​more. But you asked 2027, we'll have to see."

Beyond Wednesday's CPI release, investors will also watch for September producer-price inflation and retail sales data on Thursday and Federal Reserve Chairman Kevin Warsh's speech at the International Monetary Fund's annual meeting on Friday.

"Together, these events could shape the near-term direction of bond yields, the dollar and, consequently, precious metals," Saxo analysts said in a note.

Write to Emese Bartha at emese.bartha@wsj.com

(END) Dow Jones Newswires

October 14, 2026 04:58 ET (08:58 GMT)