U.S. Treasury yields decreased on Tuesday as investors processed economic data and considered inflation ahead of the Federal Reserve's interest rate decision next week. The benchmark 10-year Treasury yield fell over 4 basis points to 5.092%, while the 30-year Treasury bond decreased more than 5 basis points to 5.415%. The yield on the 2-year Treasury note was down 1 basis point at 4.751%. One basis point equals 0.01%, and yields and prices typically move inversely.
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The decline in yields followed disappointing housing start figures for September, which came in at 1.22 million, missing the Dow Jones forecast of 1.3 million and reflecting a 5.2% decline from August’s revised estimate. Chris Rupkey, chief economist at FWDBONDS, noted that the weak housing starts were expected due to surveys showing significant pessimism among homebuilders, attributed to labor shortages stemming from immigration policies and rising geopolitical risks affecting building material costs. He remarked, "It is not winter yet but housing is going into a deep freeze."
Investors are also looking forward to the release of additional economic data this week, including Thursday's initial jobless claims. This data will precede the Federal Reserve's upcoming interest rate decision. The Fed's preferred inflation measure, the personal consumption expenditures index, is also set for release next week. Currently, traders are pricing in an 85% chance of the Fed maintaining interest rates, a significant increase from 42.4% a month earlier.
Inflation concerns have been heightened by rising crude oil prices following the onset of the conflict in the Middle East earlier this year. On Tuesday, however, oil prices retreated slightly, with West Texas Intermediate crude futures dropping more than 1% to around $102 per barrel and Brent crude futures falling more than 2% to about $106.