U.S. Treasury Yields Drop as Soft Inflation Fuels Fed Rate Cut Bets

U.S. Treasury yields declined sharply on Wednesday after softer-than-expected inflation data bolstered expectations of Federal Reserve rate cuts. The 10-year yield fell three basis points to 4.255%, while the 2-year yield dipped to 3.711%.

July's Consumer Price Index held steady at 2.7% year-over-year, missing analyst forecasts of 2.8%. Core CPI rose 0.3% monthly, challenging the Fed's disinflation narrative yet paradoxically strengthening dovish market sentiment. The dollar weakened as traders increased bets on 2025 rate cuts.

Underlying price pressures continue building, with core inflation accelerating to 3.1% annually - the fastest pace since February. Oxford Economics projects core CPI could peak NEAR 3.8% by year-end, citing impending tariff impacts on consumer prices.