Treasury yields fall after Fed’s Waller signals support for no rate hike

Treasury yields moved lower across the curve on Thursday, as traders reacted to remarks by Federal Reserve Governor Christopher Waller saying he’s leaning toward keeping interest rates unchanged at the central bank’s next policy meeting in two weeks.

The 10-year Treasury note yield, the main benchmark for mortgages, auto loans and credit card debt, fell more than 3 basis points to 4.756%. The longer-dated 30-year Treasury yield, more sensitive to geopolitical events, dropped more than 2 basis points to 5.241%.

The shorter 2-year Treasury note yield, which tends to tracks short-term Federal Reserve interest rate decisions, was more than 5 basis points lower at 4.328%.

One basis point equals 0.01%, or 1/100th of 1%. Yields and prices move inversely to one another.

Although Waller noted that inflation is still “meaningfully above” the Fed’s 2% target, he conveyed confidence in current inflation trends, saying in remarks for a Reuters interview that they “suggest we are finally seeing some signs of disinflation.”

“If this continues in the data due over the next two weeks, I would be inclined to support holding the target for the federal funds rate at its current setting,” Waller said.

The decline in yields following his comments comes after a relentless march higher over the past month amid mounting concern over the level of debt, inflation and rising global energy prices. On Wednesday, yields touched a multi-year high.

Investors were also looking ahead to the next key reading on the state of the labor market, when August nonfarm payroll numbers are reported Friday.

Before then, investors digested the latest ISM services PMI data, which provides a monthly snapshot of U.S. service sector activity. The August reading came in at 55.4, while economists polled by Dow Jones had called for 54.1.

Elsewhere, hostilities in the Middle East are also looming over markets, after Iran launched missile and drone strikes against Kuwait, and President Donald Trump said the current flare-up in tensions would not last “too long.”

West Texas Intermediate futures for October delivery rose almost 1% to above $91 per barrel, while global oil benchmark Brent crude was last 0.5% higher at $96.

— With additional reporting by CNBC’s Jeff Cox