US Treasuries Gain as Wholesale Inflation Unexpectedly Declines

Core Insights - Treasuries rose, particularly short-dated notes, following a weaker-than-expected wholesale inflation reading, which solidified expectations for a Federal Reserve interest rate cut next week [1][3] - The yield on two-year notes fell to 3.52%, while the benchmark 10-year notes decreased to 4.06% [2] Inflation Data - The producer price index for August decreased by 0.1% month-over-month, marking the first decline in four months [3] - Core consumer prices are expected to rise at an annualized rate of 3.1%, significantly above the Fed's 2% inflation target [5] Market Expectations - Traders have fully priced in a 25 basis point reduction at the upcoming Fed meeting, with additional cuts anticipated in October and December [4] - Market sentiment indicates a strong belief that the Fed will respond to labor market weaknesses by easing monetary policy [7]