Treasury yields fall ahead of inflation data

  • October's producer price index is due out at 8:30 a.m. on Tuesday.
  • Fed Chairman Jerome Powell is set to give the opening remarks at the Conference on Diversity and Inclusion in Economics, Finance, and Central Banking, at 9 a.m. ET.

U.S. Treasury yields fell on Tuesday morning, ahead of the release of inflation data.

The yield on the benchmark 10-year Treasury note fell by less than a basis point to 1.488% at 3 a.m. ET. The yield on the 30-year Treasury bond gave up less than basis point, falling to 1.8836%. Yields move inversely to prices and 1 basis point is equal to 0.01%.

Treasurys

October's producer price index, which is one measure of inflation that measures what companies get for the goods they produce, is due out at 8:30 a.m. ET on Tuesday. Economists surveyed by Dow Jones are expecting producer prices to have risen 0.6% month over month in October.

Last month's consumer price index, which is more closely monitored by investors as a more direct measure of inflation, will then be released at 8:30 a.m. ET on Wednesday. CPI is expected to show a 0.6% jump compared to the prior month.

Inflation readings, along the recovery in the labor market, are being watched by the Federal Reserve as it starts to pare back emergency economic stimulus measures. The central bank announced last week that it would start this process by reducing its bond-buying program by the end of November.

Raising interest rates would be the next step in the Fed's normalization of monetary policy.

Fed Vice Chairman Richard Clarida said on Monday that the central bank would be watching for continued rises in inflation, employment and gross domestic product.

"While we clearly are a ways away from considering raising interest rates, if the outlooks for inflation and unemployment … turn out to be the actual outcomes, then I do believe that these three conditions for raising the target range of the funds rate will have been met by year-end 2022," he said.

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Julian Howard, head of multi-asset solutions at GAM, told CNBC's "Squawk Box Europe" on Tuesday that the "rate of ascent" of inflation had started to slow down over the past month.

He said that Friday's stronger-than-expected jobs report showed that more people were returning to the workforce and that this would "cool down" wage rises, which is a "major component of inflation."

"So I see an easing of inflation across the board and I think that the Fed will have been proved right to keep stalling and stalling on rate rises because the data will eventually bail them out on this, and I think Jerome Powell's been extremely sensible on the matter," Howard said.

On Tuesday, Fed Chairman Jerome Powell is set to give the opening remarks at the Conference on Diversity and Inclusion in Economics, Finance, and Central Banking, at 9 a.m. ET.

An auction is scheduled to be held on Tuesday for $39 billion of 10-year notes.

CNBC's Pippa Stevens and Jeff Cox contributed to this market report.

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