Treasury yields declined across the board on Thursday after Federal Reserve Governor Christopher Waller suggested he would be inclined to support keeping interest rates unchanged at the upcoming policy meeting in two weeks. Waller's comments came despite inflation remaining "meaningfully above" the Fed's 2% target, as he noted signs of "disinflation" in current trends. He stated that if this trend continues in data released over the next two weeks, he would advocate for maintaining the federal funds rate at its current level.
The 10-year Treasury note yield, a key benchmark for various loans, fell more than 3 basis points to 4.756%. The 30-year Treasury yield, which is more sensitive to geopolitical events, dropped over 2 basis points to 5.241%. The shorter-dated 2-year Treasury note yield, typically tracking short-term Fed interest rate decisions, was down more than 5 basis points at 4.328%. This movement comes after yields reached multi-year highs amidst concerns about debt, inflation, and rising global energy prices.
Waller's decision on interest rates will be "heavily influenced" by the August inflation data, which is due next week. He also mentioned that a "hot" inflation print could still trigger a rate hike. Investors are also awaiting the August nonfarm payroll numbers, a crucial labor market indicator, to be reported on Friday. Earlier, the ISM services PMI for August came in at 55.4, exceeding economists' expectations of 54.1.
Geopolitical events are also influencing markets, with hostilities in the Middle East pushing oil prices higher. West Texas Intermediate futures for October delivery rose almost 1% to over $91 per barrel, while global oil benchmark Brent crude was up 0.5% at $96.
