US yields recede as investors prep for Fed outlook at Jackson Hole event

NEW YORK – US Treasury yields slipped on Tuesday, after those on most maturities rose for three straight days, as investors braced for a key central bank gathering later this week for a sense of whether the Federal Reserve will resume cutting interest rates next month.

Fed Chair Jerome Powell is due to speak on Friday on the economic outlook at the US central bank’s annual symposium in Jackson Hole, Wyoming. Powell had used the conference to take an inflation-fighting stance when it was needed in 2022.

But until then, the bond market is in a holding pattern.

“At this point, everybody’s…in a wait-and-see mode as to what might come out at the end of the week,” said Jim Barnes, director of fixed income, at Bryn Mawr Trust in Berwyn, Pennsylvania.

“What’s interesting is that when we had the drop in yields from the labor market report a couple weeks ago, we have seen some give-back after the inflationary data, mostly with the PPI (producer price index) report from last week, which was much stronger than expected.”

In afternoon trading, US two-year yields, which are tied to the Fed’s monetary policy, slipped 1.7 basis points (bps) to 3.754%.

On the longer end of the curve, the benchmark 10-year yield also fell, down 3.7 bps at 4.302%.

US 30-year yields slipped as well, down 4 bps at 4.902%.

For now, many market participants were generally unsure of what Powell’s stance will be on Friday with respect to the September policy meeting. The Fed chief has been reticent to make a shift in policy outlook from his current hawkish view, citing uncertainty surrounding the impact of tariffs on inflation.

Victoria Fernandez, chief market strategist at Crossmark Global Investments in Houston, in an emailed comment, said a rate cut doesn’t help the labor market and the full employment mandate “if the lack of hiring we are currently experiencing is due to uncertainty over tariffs or labor-saving technologies versus a lack of demand.”

Rate easing, she noted, would provide some insurance against further deterioration in the labor market, “but is not necessarily a ‘fix’ as many believe and could even spur the bond vigilantes to push rates higher.” Bond vigilantes refer to investors who punish bad fiscal policy by governments by selling their debt, making it prohibitively expensive for them to borrow.

Barnes of Bryn Mawr Trust, on the other hand, expects Powell to strike a dovish tone in his speech on Friday even though incoming information has confounded his data-dependent strategy by pulling in both directions. Powell’s colleagues are split on whether higher inflation or higher unemployment is the bigger risk.

In other parts of the bond market, the yield curve flattened slightly, with the gap between two-year and 10-year yields at 54.6 bps, compared with 56.7 late on Monday. On Tuesday, the curve hit its steepest level since mid-July in a bear-steepening move, which was mainly a reflection of higher inflation expectations.

Treasury yields earlier in the session pared their declines after data showed overall housing starts jumped 5.2% to a rate of 1.428 million units on the back of a second month of double-digit increases in apartment projects.

But despite the bigger-than-expected gain in starts, building permits, a proxy for future home construction, fell 2.8% to a 1.35 million annualized rate, a five-year low amid muted builder sentiment.

“Housing starts jumped for the second straight month, thanks to a surge in condos,” wrote Priscilla Thiagamoorthy, senior economist, at BMO Capital Markets. “Even so, we expect residential construction to weigh on economic growth this quarter amid still-elevated interest rates and high material costs.”

In the rate futures market, traders have priced an 85% chance the Fed will cut rates in September, according to the CME’s FedWatch. That probability was at 94% a week earlier. Rate futures have also factored in about 55 bps of easing this year, compared with more than 60 bps a week ago.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Christina Fincher and Andrea Ricci)

S&P 500 seen stalling as AI rally meets tariff jitters

The S&P 500 benchmark US stock index will end 2025 just below current near-record levels, reflecting tempered optimism amid ongoing concerns over the economic impact of President Donald Trump’s global tariffs and uncertainty surrounding Federal Reserve rate cuts, according to a new Reuters poll.

Market strategists polled by Reuters showed that concerns about potential stagnation related to tariffs have dampened optimism about Wall Street’s rally in AI heavyweights.

“I do not anticipate the United States entering a recession; however, I do expect the economy to experience a slowdown,” said Robert Pavlik, senior portfolio manager at Dakota Wealth. “Many employers lack visibility into future conditions and are therefore delaying expansion.”

The S&P 500 will end 2025 at 6,300 points, equivalent to a 2.3% dip from current levels, according to the median estimate of 35 strategists, analysts, and portfolio managers polled August 7-19.

The S&P 500 ended Monday at 6,449.15 points, down 0.3% from its record high close on August 14.

Top of mind for US investors, the Fed is widely expected to cut interest rates at its September policy meeting to support economic growth, possibly followed by another reduction by December.

Some 70% of global investors surveyed by BofA Global Research in early August said they expect stagflation – the combination of below trend growth and above trend inflation – in the next 12 months.

The S&P 500 has climbed 9% so far in 2025.

Strategists’ estimates have increased since a Reuters stock poll in May, when they expected the S&P 500 to end 2025 at 5,900. But this week’s poll forecast is still down from a Reuters poll in February, when they targeted the S&P 500 to end the year at 6,500.

While strategists struggle to predict the stock market, the latest Reuters poll offers a valuable glimpse of Wall Street’s cautious sentiment following recent record gains.

A series of deals with major US trading partners, along with extensions of the White House’s self-imposed deadlines, has left investors less jittery about Trump’s on-again off-again global trade war than they were when his April tariff announcements sent global markets into a slump.

The S&P 500 and Nasdaq have climbed to record highs in 2025 in large part due to gains in Microsoft, Nvidia, Meta Platforms, and other AI heavyweights. At the same time, S&P 500 sector indexes, including healthcare, consumer discretionary, energy and real estate, are nearly unchanged for the year.

“AI is a game changer for these companies, and they are being allowed to grow without any government interference,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York. “It’s a revolution that’s going to continue for some time.”

Second-quarter financial reports on Wall Street have been stronger than expected, with S&P 500 companies on track for a 12.9% year-over-year increase in earnings, according to LSEG.

That compares to expectations of under 6% earnings growth at the start of July. Strong results from the major AI-related players are responsible for much of that increase in second-quarter earnings.

The S&P 500 is now trading at 23 times expected earnings, near its PE high in four years and well above its five-year average PE of 19, according to LSEG.

(Polling by Aman Kumar Soni and Shaloo Shrivastava; Reporting and writing by Noel Randewich; Additional reporting by Chuck Mikolajczak, Stephen Culp, Sinead Carew, Chibuike Oguh, and Caroline Valetkevitch; Editing by David Gregorio)

Dollar mixed as traders wait on Jackson Hole

NEW YORK – The dollar was mixed on Tuesday as traders awaited the Federal Reserve’s Jackson Hole Economic Policy Symposium later this week for further clues on US interest rate policy.

A speech on Friday by Fed Chair Jerome Powell is this week’s main focus, with little major economic data to drive market direction. Traders are tuned into whether Powell will push back against market pricing of a rate cut in September.

Traders ramped up bets on a rate cut at the Fed’s September 16-17 meeting after a weak July jobs report, and as last month’s consumer price inflation report showed limited upward pressure from tariffs.

But a hotter-than-expected July producer price reading has tempered some rate-cut expectations. Powell has said he is reluctant to cut rates due to an expected increase in inflation this summer from tariffs.

“Last week, when we had about 25 basis points priced in for September, and more than two cuts for the rest of the year, there was probably some risk that the Powell speech would disappoint those expectations if he wasn’t clear enough in committing to a September cut,” said Vassili Serebriakov, an FX and macro strategist at UBS in New York.

“Now that we’re pricing in about 20 basis points for September and just slightly over 50 basis points for the rest of the year, I think the risks are much more balanced,” Serebriakov added.

Traders are pricing in 54 basis points of cuts by year-end.

The Fed will also release minutes from its July 29-30 meeting on Wednesday, though they may offer limited insight as the meeting came before July’s weak jobs report.

Data on Tuesday showed groundbreaking for new US single-family homes and permits for future construction rose in July even as high mortgage rates and economic uncertainty continued to hamper home purchases.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, was last up 0.15% on the day at 98.27, with the euro down 0.12% at USD 1.1646.

Against the Japanese yen, the dollar weakened 0.22% to 147.54.

Currency moves have been relatively muted for the past few weeks following a steep drop in the dollar in the first half of the year.

“There’s been a bit of de-risking in FX over the summer, and now investors are just waiting for the more clear catalyst for the next move,” said Serebriakov.

In other currencies, sterling slipped 0.16% to USD 1.348. The Aussie dropped 0.62% to USD 0.6451, the weakest since August 5.

Traders are also focused on any developments in peace talks to end the Russia-Ukraine war.

US President Donald Trump said on Tuesday he hoped Russian President Vladimir Putin would move forward on ending the war in Ukraine, but conceded that the Kremlin leader may not want to make a deal at all, adding this would create a “rough situation” for Putin.

In cryptocurrencies, Bitcoin fell 2.88% to USD 113,112.

(Reporting by Karen Brettell; Additional reporting by Jaspreet Kalra; Editing by Sharon Singleton and Richard Chang)

Asia shares dip before Fed gathering; European futures up on Ukraine summit hopes

TOKYO – Stocks in Asia and oil prices edged lower on Tuesday before a key meeting of central bankers and as traders evaluated promising diplomatic signals toward ending hostilities between Russia and Ukraine.

European equity futures posted modest gains after Ukrainian President Volodymyr Zelenskiy said security guarantees for his nation will likely be worked out within 10 days after talks with US President Donald Trump and European leaders.

Japan’s Nikkei share gauge set a new intraday record high before heading lower. The US dollar held on to gains from the previous session as traders awaited policy hints from the Federal Reserve ahead of its annual gathering in Jackson Hole, Wyoming.

“The Jackson Hole Symposium looms as one potential source of volatility, and going into the event, the markets remain cautious,” Kyle Rodda, an analyst at Capital.com, wrote in a note to clients.

“A dovish shift is being priced in, with further strength in equity markets – and weakness in the US dollar – reliant on the Fed meeting these expectations.”

MSCI’s broadest index of Asia-Pacific shares outside Japan slid 0.2% in early trading, after US stocks ended the previous session with mild losses.

Pan-region Euro Stoxx 50 futures were up 0.3%, German DAX futures rose 0.2%, and FTSE futures added 0.3%.

NATO Secretary General Mark Rutte told Fox News on Monday that Trump’s meeting with Zelenskiy and other European and NATO partners was very successful.

The meeting followed a summit in Alaska between the US president and Russian leader Vladimir Putin, which did not result in an agreement on ceasing hostilities in the 3-1/2-year-old war.

In a social media post late on Monday, Trump said he had called Putin and begun arranging a meeting between Putin and Zelenskiy, to be followed by a trilateral summit among the three presidents.

While traders are keeping an eye on geopolitical developments, another key focus for the week is the Fed’s August 21-23 Jackson Hole symposium, where Chair Jerome Powell is due to speak on the economic outlook and the central bank’s policy framework.

Money markets reflect an 83.6% chance of a quarter-point rate cut at the Fed’s meeting on September 17, according to CME FedWatch.

Japan’s Nikkei stock index rose at the open before sliding 0.5%, dragged lower by a 5% plunge in SoftBank Group after the company announced a USD 2 billion stake in struggling US chipmaker Intel.

The dollar was little changed at 147.78 yen. The euro traded steady at USD 1.1658, while the dollar index, which tracks the greenback against a basket of currencies, edged up to 98.171 after a 0.2% gain in the previous session.

US crude dipped 0.2% to USD 63.29 a barrel. Spot gold was slightly higher at USD 3,334.9 per ounce.

(Editing by Shri Navaratnam)

Dollar bides time as markets brace for Ukraine summit

SINGAPORE – The US dollar held steady against its major peers on Tuesday as global markets awaited the outcome of a White House summit with European nations that could determine the next phase of the war in Ukraine. The dollar index rose 0.31% to 98.122 with geopolitical events taking centre stage, after US President Donald Trump told President Volodymyr Zelenskiy on Monday that the United States would help guarantee Ukraine’s security in any deal to end the war with Russia.

“At the moment, markets are cautious,” said Tina Teng, an independent market analyst in Auckland, as traders weighed the possible implications for the global energy markets.

“The US dollar is going stronger against other currencies and the risk-on sentiment is still leading markets at the moment,” she added, citing stock indexes at record highs.

The euro held steady at USD 1.1667, up 0.06% so far in Asia, shuffling along the midpoint of the trading range it has sat in for the past two weeks. Markets are seeking direction this week from the Federal Reserve’s annual symposium in Jackson Hole on the likely path of interest rates. Fed Chair Jerome Powell is due to speak on the economic outlook and the central bank’s policy framework.

Many investors are away for summer holidays in the northern hemisphere, while markets will be left with few catalysts amid a thin diary of data releases on Tuesday. Cryptocurrencies bucked the trend, with bitcoin falling 0.3% to notch a third straight day of declines after hitting a record high on Thursday. Ether sank 0.6%, extending losses for a second day after failing to breach a record high last week. Against the yen, the dollar was at 147.835 yen, unchanged from late US levels and nearing the top of the trading channel it has sat in all month.

Japanese stock markets advanced in early trading on Tuesday, with both the Nikkei 225 and the Topix at record levels. The Australian dollar fetched USD 0.6495, up 0.1% in early trade, after Westpac’s consumer sentiment data for August rose to a 3-1/2-year high. The kiwi tacked on 0.1% to USD 0.59245. Sterling traded at USD 1.351, up 0.1% so far on the day, after rebounding from the low end of its range recorded over the past week.

(Reporting by Gregor Stuart Hunter; Editing by Shri Navaratnam)

Wall Street ends on muted note ahead of Jackson Hole summit, retailers’ earnings

Wall Street’s main indexes closed roughly flat on Monday, after struggling for direction while investors awaited a raft of corporate earnings reports from major retailers for more signs about the state of the economy and the Federal Reserve’s annual symposium in Jackson Hole.

Walmart, Home Depot, and Target, among others, are set to report results this week and are likely to indicate how trade uncertainty and inflation expectations have affected US consumers.

Investors are also closely watching the Fed’s Jackson Hole, Wyoming, conference between August 21 and 23, where Fed Chair Jerome Powell is expected to speak, could offer more clarity on the economic outlook and the central bank’s policy framework.

Talks at the White House on Monday between US President Donald Trump and Ukrainian President Volodymyr Zelenskiy failed to move the market significantly.

“It’s a quiet day, with investors getting ready for things to come,” said Jed Ellerbroek, portfolio manager at Argent Capital. “The most important event is Powell’s speech, as we expect updated thoughts about how the Fed is viewing this economic environment where inflation is at a fairly high level while unemployment seems to have a rising trend.”

Data on Friday showed that while retail sales were increasing broadly as anticipated, consumer sentiment overall had taken a hit from mounting inflation fears. On Monday, the National Association of Home Builders/Wells Fargo Housing Market Index fell to the lowest reading since December 2022.

Wall Street’s main indexes rallied over the past two weeks, with the blue-chip Dow .DJI hitting an intraday record high on Friday, aided by interest rate cut expectations and a better-than-expected earnings season despite an uncertain trade environment.

On the geopolitical front, Trump and Zelenskiy met to discuss the future of the war in Ukraine, days after Trump’s summit with Russian President Vladimir Putin which yielded no concrete outcome. Trump said he would call Putin and that it was possible the three leaders could hold a meeting.

The Dow Jones Industrial Average fell 34.30 points, or 0.08%, to 44,911.82, the S&P 500 lost 0.65 point, or 0.01%, to 6,449.15 and the Nasdaq Composite gained 6.80 points, or 0.03%, to 21,629.77.

Investors continue to price in a 25-basis-point cut from the Federal Reserve next month, although they have lowered their expectations for another rate cut this year, according to data compiled by LSEG.

Recent data has also suggested that while US tariffs have not filtered in to headline consumer prices yet, weakness in the jobs market could nudge the central bank to take a more dovish stance.

Intel shares fell 3.66% after a Bloomberg report said the Trump administration is in talks to take a 10% stake in the chipmaker.

Dayforce jumped 26% after a report that private equity firm Thoma Bravo was in talks to acquire the human resources management software firm.

Solar stocks including SunRun and First Solar gained 11.35% and 9.69%, respectively, after the US Treasury Department unveiled new federal tax subsidy rules for solar and wind projects, which were less strict than investors had feared.

Advancing issues outnumbered decliners by a 1.16-to-1 ratio on the NYSE. There were 185 new highs and 36 new lows on the NYSE.

The S&P 500 posted 9 new 52-week highs and 3 new lows while the Nasdaq Composite recorded 80 new highs and 69 new lows.

(Reporting by Carolina Mandl in New York and Johann M Cherian and Sanchayaita Roy in Bengaluru; Editing by Shinjini Ganguli and Matthew Lewis)

US yields tick up as traders stick with bets on September rate cut

WASHINGTON – US Treasury yields ticked up slightly on Monday as investors held onto bets that the Federal Reserve would cut interest rates next month despite data last week showing stronger-than-expected producer price inflation in July.

Yields inched higher after dipping earlier, following the National Association of Home Builders’ release of August data showing US homebuilder sentiment dropped to its lowest level since late 2022.

The yield on the benchmark US 10-year note was up 0.9 basis points from Friday’s close to 4.337%.

The two-year Treasury’s yield, which typically moves in step with interest rate expectations, inched up 1.2 bps from Friday’s close and was last at 3.771%. US two-year yields leaped last Thursday following the release of the producer inflation report, but have since fallen on renewed rate-cut expectations.

“Treasury volatility is remarkably subdued of late,” said James Camp, managing director of strategic income at St. Petersburg, Florida-based Eagle Asset Management.

“A few cuts on the short end may help housing if adjustable mortgage products follow in kind,” Camp later added on Monday’s homebuilder report.

Traders see an 84.2% chance of a 25-basis-point cut to the US central bank’s policy rate at its September 16-17 meeting, according to Fed funds futures. The Fed’s policy rate has been in the 4.25%-4.50% range since December.

The most closely-watched event this week will be the Fed’s annual Jackson Hole central banking symposium in Wyoming. Some market participants anticipate Fed Chair Jerome Powell will take a hawkish tone in his keynote speech on Friday.

Rates are likely rangebound over the next few trading sessions, said Lawrence Gillum, chief fixed income strategist at LPL Financial in Fort Mill, South Carolina.

“That said, ongoing concerns about the US fiscal situation and elevated Treasury issuance tend to be the primary catalyst for marginally higher yields absent economic data,” Gillum added.

The closely watched gap between yields on two- and 10-year Treasury notes US2US10=TWEB, considered a gauge of growth expectations, last stood at 56.8 bps versus 56 bps late Friday. It earlier reached its steepest since mid-July at 57.8 basis points.

Investors have their eyes this week on a slew of earnings releases from major US retailers – including Home Depot, Target, and Walmart – for any dents in resilient consumer spending.

“My general view of the economy is that it is slowing in a lot of places and job losses will grow ahead of year-end,” Tom di Galoma, managing director of rates and trading at Mischler Financial in Park City, Utah, said in a note.

Treasuries appeared to have a muted reaction to Monday’s meeting between US President Donald Trump and Ukrainian President Volodymyr Zelenskiy, where Trump agreed to provide security to Ukraine as part of any deal to end Russia’s war in Ukraine. The meeting followed Trump’s Friday meeting with Russian President Vladimir Putin.

The Treasury Department held two auctions on Monday. An auction for USD 82 billion in 13-week bills was 2.7 times oversubscribed with an investment rate of 4.232%. Another auction for USD 73 billion in 26-week bills was nearly three times oversubscribed with an investment rate of 4.081%.

(Reporting by Matt Tracy; Editing by Paul Simao, Rod Nickel)

Dollar in doldrums as Fed rate-cut bets build; bitcoin soars to record high

TOKYO – The dollar languished near multi-week lows against the euro and sterling on Thursday as traders ramped up bets for the Federal Reserve to resume cutting interest rates next month.

Rising expectations for Fed easing, combined with increasing institutional cryptocurrency investment, sent bitcoin powering to a fresh record peak.

The dollar index, which measures the currency against the euro, sterling, and four other major peers, was steady at 97.704 as of 0002 GMT. It dropped some 0.8% over the previous two sessions, having dipped to 97.626 on Wednesday for the first time since July 28.

The euro edged up to USD 1.1713, nearing Wednesday’s high of USD 1.1730, a level last seen on July 28.

Sterling rose to USD 1.3586 for the first time since July 24.

Against Japan’s currency, the greenback lost 0.3% to 146.95 yen.

Fed rhetoric has turned overall more dovish of late, amid signs of a cooling labour market and with President Donald Trump’s tariffs not adding to price pressures in a significant way as of yet.

Traders see a Fed rate cut on September 17 as a near certainty, according to LSEG data, and even lay around 7% odds on a super-sized half-point reduction.

“For the markets, it’s not even a matter of if the Fed cuts interest rates in September, it’s a question of how much,” said Kyle Rodda, an analyst at Capital.com.

“Signs of a downturn in the labour market have pushed futures to bake in a series of rate cuts before the end of the year.”

On Wednesday, Treasury Secretary Scott Bessent called for a “series of rate cuts,” and said the Fed could kick off the policy rate easing with a half-point cut.

Trump has repeatedly criticized Fed Chair Jerome Powell for not easing rates sooner.

A weaker dollar, the specter of political interference in US monetary policy, and the increase in investor risk appetite amid Fed easing prospects all converged to buoy bitcoin to its first record peak since July 14, pushing as high as USD 123,674.71 in the latest session.

Bitcoin was already underpinned by increased institutional money flows this year in the wake of a spate of regulatory changes spearheaded by Trump, who has billed himself the “cryptocurrency president.”

In the latest move, an executive order last week paved the way to allow crypto assets in 401(k) retirement accounts.

“Corporate treasuries like MicroStrategy and Block Inc. continue to buy bitcoin,” said IG analyst Tony Sycamore.

“Technically, a sustained break above USD 125,000 could propel bitcoin to USD 150,000.”

(Reporting by Kevin Buckland; Editing by Shri Navaratnam)

S&P 500, Nasdaq hit new closing highs on rate cut hopes

NEW YORK – The benchmark S&P 500 and Nasdaq indexes hit new closing highs for the second straight day on Wednesday on hopes that the Federal Reserve was getting close to a monetary easing cycle.

But the market reflected weakness in some technology stocks after the previous day’s strong gains.

Signs that US tariffs on imports have not fully filtered into headline consumer prices came as a relief for investors this week as they seek insight on the impact of trade uncertainty on the economy.

Some large technology stocks including Nvidia, Alphabet, and Microsoft – among the so-called Magnificent Seven stocks – were lower as investors searched for new growth drivers.

“Valuations are elevated. I do think, though, at the end of the day, the key will be the delivery of earnings, and that’s what we’re seeing,” said Katherine Bordlemay, co-head of client portfolio management, fundamental equities at Goldman Sachs Asset Management.

She said the dispersion of stock-level returns in the US is at one of the higher levels of the last 30 years.

Apple rose as Bloomberg News reported the company is plotting expansion into AI-powered robots, home security and smart displays.

According to preliminary data, the S&P 500 gained 21.01 points, or 0.33%, to end at 6,466.77 points, while the Nasdaq Composite gained 32.08 points, or 0.15%, to 21,713.99. The Dow Jones Industrial Average rose 469.10 points, or 1.06%, to 44,927.71.

The Russell 2000 index, which tracks rate-sensitive small-cap companies, added more gains to hit a six-month high.

Traders are now fully pricing in a 25 basis-point interest rate cut, according to the CME’s FedWatch Tool. The central bank last lowered borrowing costs in December.

Treasury Secretary Scott Bessent said on Wednesday he thought an aggressive half-point cut was possible, given recent weak employment numbers.

Investors were also taking notice of other sectors following the recent tech-led rally in US stocks that has pushed valuations of the S&P 500 above long-term averages.

Healthcare stocks, which have been beaten down for much of the year, led gains among the 11 S&P 500 sectors.

Chicago Federal Reserve President Austan Goolsbee said on Wednesday the US central bank is grappling with understanding whether tariffs will push up inflation just temporarily or more persistently, which would inform its decision on when to cut interest rates.

CoreWeave, which is backed by Nvidia, fell sharply after the AI data center operator reported a bigger-than-expected quarterly net loss.

Paramount Skydance jumped as the company won exclusive broadcasting rights to the Ultimate Fighting Championship for seven years.

(Reporting by Saeed Azhar in New York and Johann M Cherian and Sanchayaita Roy in Bengaluru; Editing by Maju Samuel and Matthew Lewis)

US yields fall as traders boost bets on September rate cut

US Treasury yields fell on Wednesday as traders raised bets that the Federal Reserve will resume interest-rate cuts in September and after a backup in longer-dated yields on Tuesday attracted foreign buyers.

Tuesday’s consumer price inflation report showed that President Donald Trump’s tariff policies have not yet increased price pressures as many Fed policymakers including Chair Jerome Powell have anticipated.

As a result, it is more likely that the Fed will cut rates as the labor market weakens and other data also points to a slowing economy.

“The general sense is that we were going to see more pass-through (inflation) in July. That didn’t happen,” said Vail Hartman, US rates strategist at BMO Capital Markets.

“That doesn’t mean we’re not going to see it in the coming months, but the fact that it didn’t happen in July has now galvanized those calls for a September cut, particularly given that we’ve already seen the labor market start to come under pressure in the last couple of months,” he said.

Investors will focus on whether Powell offers any new clues on policy at the US central bank’s annual economic policy symposium in Jackson Hole, Wyoming, next week.

With the market already pricing in a September cut, the question is most likely to be whether Powell pushes back against market expectations, said Hartman.

Fed funds futures traders are now pricing 25.7 basis points in cuts in September, indicating they are beginning to see the possibility that the Fed could cut rates by 50 basis points next month.

Treasury Secretary Scott Bessent said on Wednesday that there is a good chance of a 50-basis-point cut next month.

Chicago Fed President Austan Goolsbee said the US central bank is grappling with understanding whether tariffs will push up inflation just temporarily or more persistently, which would inform its decision on when to cut rates.

The interest-rate-sensitive 2-year note yield was last down 4.2 basis points on the day at 3.689%. The yield on benchmark US 10-year notes fell 5.3 basis points to 4.24%.

The yield curve between 2-year and 10-year notes flattened by around one basis point to 55 basis points.

Longer-dated Treasuries attracted buyers following a backup in yields on Tuesday that was driven by a selloff in European government bonds.

“The post-CPI dip that we saw yesterday proved to be an attractive level to add from the perspective of overseas investors,” said Hartman.

Traders are also focused on who Trump is likely to nominate as the next Fed chair when Powell’s term ends in May.

The Trump administration is considering 11 candidates to replace Powell, CNBC reported on Wednesday, citing two administration officials.

Meanwhile, Ukraine and its European allies on Wednesday signaled hope that Trump would push for a ceasefire at talks with Russia’s Vladimir Putin without selling out Ukraine’s interests or proposing to carve up its territory.

(Reporting by Karen Brettell; Editing by Andrea Ricci and Leslie Adler)

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