US bond yields continued to rise during Tuesday's trading, as the sell-off of government debt continued amid growing market bets that the Federal Reserve will raise interest rates, while awaiting important economic data that could determine the course of monetary policy in the coming period.
According to the CME Fidwatch tool, markets are currently pricing in a roughly 70% probability of a 25-basis-point US interest rate hike at the Fed's October meeting, amid ongoing concerns about inflation and investors' assessment of the US economic outlook.
All eyes will be on Wednesday for the release of the core PCE (Personal Consumption Expenditures) price index, the Federal Reserve's preferred inflation measure, for August, while the US jobs report for September is due on Friday.
The upcoming data is of particular importance to bond markets, as a higher-than-expected inflation reading or continued strength in the labor market could bolster expectations of an interest rate hike, while indicators of slowing prices and employment could help ease pressure on bond yields.
During trading, the yield on two-year Treasury bonds, which is more sensitive to monetary policy expectations, rose to 4.937%, an increase of 1.3 basis points.
The yield on 10-year bonds also rose to 5.25%, up by about one basis point, while the yield on 30-year bonds reached about 5.55%.
The rise in bond yields reflects the continued repricing of interest rate expectations in the markets, which could increase borrowing costs for businesses and individuals and put pressure on valuations of stocks and high-risk assets. Meanwhile, investors are awaiting inflation and jobs data to determine whether the yield rally will continue, especially with the Federal Reserve meeting approaching in October.
