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Treasury yields fall as traders see September rate cut

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Bessent says good chance of 50 bps rate cut

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Trump admin considering 11 candidates for Fed Chair

By Karen Brettell

Aug 13 (Reuters) - U.S. Treasury yields fell on

Wednesday as traders raised bets that the Federal Reserve will

resume interest rate cuts in September and after a backup in

longer-dated yields on Tuesday attracted foreign buyers.

Tuesday's consumer price inflation report showed that U.S.

President Donald Trump's tariff policies have not yet increased

price pressures as many Fed policymakers including Chair Jerome

Powell have anticipated.

That makes it more likely that the Fed will cut rates as the

labor market weakens and other data also points to a slowing

economy.

"The general sense is that we were going to see more pass

through (inflation) in July. That didn't happen. That doesn't

mean we're not going to see it in the coming months, but the

fact that it didn't happen in July has now galvanized those

calls for a September cut, particularly given that we've already

seen the labor market start to come under pressure in the last

couple of months," said Vail Hartman, U.S. rates strategist at

BMO Capital Markets.

Investors will focus on whether Powell offers any new clues

on policy at the U.S. central bank's annual economic policy

symposium in Jackson Hole, Wyoming next week.

With the market already pricing in a September cut, the

question is most likely to be whether Powell pushes back against

market expectations, said Hartman.

Fed funds futures traders are now pricing 25.7 basis points

in cuts in September, indicating they are beginning to adjust

for the possibility that the Fed could cut rates by 50 basis

points that month.

Treasury Secretary Scott Bessent said on Wednesday that

there is a good chance of a 50-basis-point cut next month.

The interest rate sensitive 2-year note yield was

last down 4.6 basis points on the day at 3.685%. The yield on

benchmark U.S. 10-year notes fell 4.3 basis points

to 4.25%.

The yield curve between two-year and 10-year notes

was little changed on the day at 55.5 basis

points.

Longer-dated Treasuries attracted buyers following a backup

in yields on Tuesday that was driven by a selloff in European

government bonds.

"The post-CPI dip that we saw yesterday proved to be an

attractive level to add from the perspective of overseas

investors," said Hartman.

Traders are also focused on who Trump is likely to nominate

as the next Fed chair when Powell's term ends in May.

The Trump administration is considering 11 candidates to

replace Powell, CNBC reported on Wednesday citing two

administration officials.