30-year Treasury yield ends at one-week low ahead of Thursday’s U.S. inflation data

What happened

• The yield on the 2-year Treasury
  BX:TMUBMUSD02Y
  rose 4.4 basis points to 4.8% from 4.756% on Tuesday.

• The yield on the 10-year Treasury
  BX:TMUBMUSD10Y
  declined 1.3 basis points to 4.011% from 4.024% Tuesday afternoon. The 10-year rate ended at the lowest level since July 31 on Tuesday, and held that distinction once again on Wednesday, based on 3 p.m. figures from Dow Jones Market Data.

• The yield on the 30-year Treasury
  BX:TMUBMUSD30Y
  slipped 2.6 basis points to 4.178% from 4.204% late Tuesday. Wednesday’s level is the lowest in one week.

What drove markets

Treasury yields held mostly steady as traders waited for the July consumer price index from the Bureau of Labor Statistics, out on Thursday. Economists polled by The Wall Street Journal expect the data to show a 3.3% annual headline CPI rate for last month, versus 3% in June, and a core rate over the past 12 months of 4.7% versus 4.8% previously.

Read: July CPI to come in close to expectations as U.S. settles into final mile along the road to lower inflation, traders say

Helping to keep U.S. yields in check on Wednesday was data from China, where consumer prices fell for the first time in more than two years, dropping by 0.3% in July from a year earlier. Meanwhile, factory-gate prices fell 4.4% from a year ago.

There were no U.S. major economic updates on Wednesday. Treasury’s $38 billion auction of 10-year notes produced what observers described as “good” to “fair” results.

What analysts are saying

Wednesday’s data revealed that China was in “deep deflation last month,” said global FX and interest-rates strategist Thierry Wizman and others at Macquarie.

“We’re still pretty convinced about inflation in the U.S. continuing to ease, led by a disinflation in shelter prices — which is 35% of the headline CPI index,” they wrote in a note on Wednesday. “For many months, it’s been the decline in inflation in ‘asking rents’ or rents in new listings (mainly, from third-party sources, such as Apartment List, and Zillow) that has strengthened our resolve in the prospect that disinflation will be also seen in the BLS’s CPI measure.”