Quick overview

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U.S. Treasuries fell for the first time in five days as investors awaited this week’s inflation data, which may show that ongoing price pressures could prevent the U.S. from cutting interest rates. While yields increased across all tenors, the rate on two-year notes—which most closely reflect changes in monetary policy—rose six basis points to 3 percent.

The selloff indicated a reversal, especially after Friday’s notable surge when lower-than-expected employment data rekindled the Federal Reserve’s expectations for a rate cut.

Producer and consumer price readings for August are scheduled for release on Wednesday and Thursday. The CPI is expected to show an acceleration despite the weakening job market. A quarter-point rate cut by Fed policymakers at the end of their next meeting in September is fully priced in by traders.

The outlook for cuts in October and December may also be hindered by sticky inflation. Over the past week, traders have increased their bets on rate cuts, favoring them at each of the upcoming three meetings. The U.S. government’s release of a preliminary benchmark revision to payrolls data for the year through March highlighted the job market’s health, even as market attention has shifted back to inflation.

A Bloomberg survey of forecasters indicates that the number of workers is likely to be revised down by 911,000, exceeding the median expectation of 682,000. The final figures will be released in February. Recent weaknesses in monthly job data are considered to be more significant.