(Bloomberg) -- Treasuries slipped, snapping a four-day winning streak, as investors braced for inflation readings this week which may show that ongoing price pressures could stand in the way of US interest-rate cuts.
Yields rose by two to three basis points across maturities, with the 10- and 30-year tenors climbing from the lowest levels in several months. Weaker-than-expected employment data released Friday revived expectations for Federal Reserve rate cuts, spurring the Treasury market's latest gains.
While the market's focus has shifted back to inflation, investors also are anticipating the annual preliminary benchmark revision of US payrolls data at 10 a.m. New York time. Further signs of softening could further raise expectations for Fed easing, which stand just short of 75 basis points by year end.
The bond rally paused ahead of August consumer prices data to be released Thursday and expected to show acceleration despite the softening job market. While traders have fully priced in a quarter-point rate cut by Fed policymakers at the conclusion of their next meeting on Sept. 17, sticky inflation could hurt the outlook for cuts in October and December as well. August producer prices data — measuring inflation for businesses — is scheduled for Wednesday.
"The market is pricing a soft landing and it is not sure the Fed will be forced to cut more than priced," said Antonio Del Favero, head of US rates strategy at Macro Hive.
Traders are assigning more than 90% probability that the Fed will cut rates by a total of 75 basis points by the end of December, having ramped up bets for cuts over the past week.
The Bureau of Labor Statistics' revised jobs survey for the year through March is expected to be far less robust than the existing data, which could revive the Treasury rally, Del Favero said.
The US unemployment rate increased to 4.3% in August, the highest level since 2021 but still low by historical standards.
"I don't think this calls for the fever pitch around 'Let's cut,'" Oksana Aronov, JPMorgan Asset Management's head of market strategy, told Bloomberg Surveillance Tuesday. "The Fed keeps calling this level of rates mildly restrictive and it's hard to see where it's restrictive."
--With assistance from Carter Johnson.
(Updates yield levels.)
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