The yield on the benchmark 10-year Treasury note was almost 5 basis points lower, trading at 3.314%. The 30-year Treasury yield fell 4 basis points to 3.473%. Meanwhile, the yield on the 2-year note also fell more than 4 basis points to 3.526%. Returns move inversely to prices and the basis unit is equal to 0.01%. On the data front, investors will be watching the release of the US consumer price index report for August. Markets are pricing in a 9-in-10 chance that the Federal Reserve will raise interest rates by 75 basis points for a third time next week, but bond purchases essentially signal that markets believe the inflation trajectory is headed downward. On Monday, the New York Fed’s survey of consumer expectations showed that in August Americans expected inflation to be 5.7% a year ahead. That’s down from 6.2% in July and the lowest reading since October 2021. Prices for energy, used cars and even food have fallen slightly. But there’s a key difference between inflation in goods and services, Cesar Perez Ruiz, chief investment officer at Pictet Wealth Management, told CNBC’s “Capital Connection” on Tuesday.

“(Falling) goods inflation will reduce that inflation, but what we really need to look for in the numbers are two things: one is the median CPI (consumer price index) and the other is the core CPI. Because that services inflation — rents, which continue to rise, wages will continue to be higher, that’s what will determine the key element that we’re all watching to keep that risk: when and what will make the Fed pivot,” Ruiz said .. The wealth manager sees overall economic sentiment continuing to decline, however, and forecasts a mild U.S. recession and a contraction in GDP growth of 0.8% in 2023. On rate hikes, “Our view is 75, 50 and then 25 (basis points),” Ruiz added. “We don’t expect cuts next year, the key question is what will make them turn around.” Meanwhile, Credit Suisse sees the Federal Reserve halting rate hikes earlier than expected due to falling inflation, which could spark a market rally, the bank’s chief U.S. equity strategist told CNBC on Monday . “That’s actually what’s being priced into the market in general,” Jonathan Golub said. “Every one of us sees when we go to the gas station that the price of gas is down and oil is down. We even see it with food. So, it’s really already showing in the data. And that’s really a big potential positive.”