Bond Market Update

July rate-hike possibility fading away

• Treasury yields have come in following the release of the June PPI report, which was better than expected and mitigated some of the market's most pressing inflation concerns.
• Expectations for a rate hike this month have been dialed back, with yesterday's pleasing CPI report providing much of the rate-hike relief. Today's PPI report has helped keep the notion of a rate hike at the July meeting in check.
  • The CME FedWatch Tool shows a mere 10.2% probability of a 25 basis point hike at the July meeting versus 41.7% only a few days ago.
• Remarks today from New York Fed President Williams (FOMC voter) have also helped rein in rate-hike worries. Mr. Williams said there are encouraging reasons to think inflation has peaked and should edge down in coming months.
• Yield check:
  • 2-yr: -4 bps to 4.15%
  • 3-yr: -4 bps to 4.20%
  • 5-yr: -4 bps to 4.28%
  • 10-yr: -3 bps to 4.56%
  • 30-yr: unch at 5.09%