10-Year Yields Are Lowest in Months in a Big Week for Treasuries

The consumer price index is the highlight of this week for the bond market. (Spencer Platt/Getty Images)

Treasury investors have turned aggressively bullish at the start of a pivotal week for the market.

The yield on the 10-year note, the basis for mortgages and credit-card rates, fell as far as 4.046% on Monday, putting it at the lowest intraday level since early April, five months ago. It has fallen a total of 0.224 percentage points over the past four days, the greatest four-day decline since early April, according to the Dow Jones Market Data team.

Yields turn lower when prices of Treasuries rise, as they have since early this month. That offers a nice bonanza for investors looking to sell ahead of a major week for the market.

First up will be news about the job market, on Tuesday. The Bureau of Labor Statistics is set to release a revision to employment data for the 12-month period through March. Based on a more robust data set that includes state unemployment records, the revision is expected to show significantly weaker job growth than the BLS had reported.

Goldman Sachs estimates that gains are overstated by an average of as much as 80,000 a month. Deutsche Bank estimates 50,00 to 60,000.

That would indicate the labor market has been weaker than currently understood. Weak economic data raise the likelihood of interest-rate cuts and push investors further into safe assets such as bonds. That means 10-year Treasury yields may fall further as prices rise.

“We can see the 10yr Treasury yield targetting still lower as an attack on 4% is successful,” wrote ING’s regional head of research, Padhraic Garvey. “But that’s likely an overshoot to the downside.”

He forecast that yields will go to 3.75%, and then race back to 4.5% as inflation rises in the coming months. Higher inflation lowers the value of the expected fixed payouts from bonds, forcing investors to demand higher yields to keep pace.

That means Thursday’s release of inflation figures will be a highlight of the week. Economists expect the data will show the consumer price index rose 0.3% in August from July, matching the pace in July, excluding the volatile costs of food and energy.

In late 2024, rising inflation pushed 10-year yields higher, even after a September rate cut from the Federal Reserve. The central bank is widely expected to cut interest rates next week.

“There is a risk that the market sees another rate cut as a policy mistake, given looming tax cuts and given that the full effects of the tariffs have not yet been felt,” wrote Will Denyer, a partner and chief economist at Gavekal Research. “If so, the bond market could sell off.”

Tax cuts and tariffs are both understood to be inflationary.

Sales of government debt are a third factor to watch this week. The Treasury is auctioning $39 billion worth of 10-year notes on Wednesday, and market watchers will be looking for signs that investors are demanding higher yields as the government’s tax and spending policies force the department to issue more debt.

Debt expiring in three years and 30-years will be auctioned on Tuesday and Thursday, respectively, but those maturities typically contribute less to investors’ perception of demand and supply than the 10-year note.

Write to Karishma Vanjani at karishma.vanjani@dowjones.com.