U.S. Treasury yields fell on Thursday, Sept. 3, after Federal Reserve Governor Christopher Waller signaled a patient approach to monetary policy. Markets adjusted the probability of a September hike to 50.4 percent, down from 63.2 percent the prior session, according to CME FedWatch data.
Waller stated in prepared remarks at a Reuters NEXT Newsmaker event in Washington that he is inclined to advocate for keeping interest rates steady at the central bank's upcoming policy meeting, contingent on future data confirming a cooling of inflation pressures. He emphasized a preference to observe whether price pressures ease before making any adjustments.
The yield on the benchmark 10-year Treasury note dropped 3.8 basis points to 4.756 percent, its largest single-day fall since Aug. 25. The 10-year had climbed to 4.818 percent on Wednesday, its highest level since Nov. 1, 2023. The 30-year bond yield fell 2.8 basis points to 5.239 percent.
Weekly initial jobless claims rose by 2,000 to a seasonally adjusted 206,000, according to Labor Department data. The figure slightly exceeded the 205,000 estimate from economists polled by Reuters.
Jay Hatfield, chief executive and chief investment officer at Infrastructure Capital Advisors in New York, said the market's previous positioning "got overbaked." He noted that while incoming data might support a cut, headline inflation remains a significant concern. Hatfield said the December contract is becoming more relevant for rate increase expectations, though the underlying data does not yet fully support them. He called the upcoming Consumer Price Index report critical.
Yields pared some losses after the Institute for Supply Management reported its nonmanufacturing Purchasing Managers' Index rose to 55.4 last month, surpassing the 54.2 estimate and signaling resilience in the services sector.
In commodities, U.S. crude increased 0.24 percent to $91.23 a barrel. Brent crude fell 0.25 percent to $95.39 per barrel.
