Treasury yields edged lower Monday, extending recent declines, after the Empire State Manufacturing Index came in far below what Wall Street economists had expected and traders looked ahead to the Federal Reserve enacting an interest rate cut later this week.
The yield on the benchmark 10-year Treasury dropped 2.4 basis points to 4.036%. Last week, the 10-year briefly dipped to 4.00% after data showed the labor market was weaker than anticipated. The yield on the 2-year Treasury fell 2.3 basis points Monday to 3.535%, while the 30-year Treasury bond yield declined 2.3 basis points to 4.656%.
One basis point equals 0.01%, and bond yields and prices move in opposite directions.
Factory activity in the New York area tumbled 21 points to -8.7, the Federal Reserve reported Monday, while economists polled by Dow Jones had expected a reading of 4.5 for the month of September, lower than the August reading of 11.9. Numbers below zero suggest a contraction in the sector. The new orders component of the index slid 35 points and the shipments index slumped 30, both to the lowest since April 2024.
Members of the interest-rate-setting panel of the Federal Reserve are expected to meet for two days this week starting Tuesday, before revealing their decision on Wednesday. The U.S. central bank is widely expected to cut interest rates, with the market pricing in a 25-basis-point, or quarter-percentage-point, reduction. The CME Group's FedWatch data also points to a similar cut in October and December.
"We stay risk-on as the Federal Reserve likely resumes cutting policy rates this week. A softening labor market gives the Fed space to cut, helping ease brewing political tensions from higher interest rates … yields could fall further near term even if the structural pressures driving them up, including loose fiscal policy globally, persist," said a Monday research report from BlackRock Investment Institute.
Ahead of the Fed meeting, investors on Tuesday will study the latest data on import and export prices, as well as retail sales figures for August.
Last week, data showed that the U.S. consumer price index rose to 2.9% on an annual basis in August, with the CPI notching its biggest monthly jump since January. Annual core inflation — more closely watched by Fed officials — rose to 3.1%.The Federal Reserve's headline inflation target is 2%. Â
Meanwhile, the Labor Department reported a higher-than-expected rise in weekly jobless claims, with unemployment compensation filings hitting their highest level since October 2021.
— CNBC's Jeff Cox, Sarah Min and Sean Conlon contributed reporting.