Softer US Inflation Data Leads to Decline in Treasury Yields, Repricing of Fed Rate Expectations

US inflation data for June showed softer-than-expected readings, with the Producer Price Index (PPI) falling 0.3% month-on-month, marking the first decline since August 2025. This followed a benign Consumer Price Index (CPI) report, leading to a decline in US Treasury yields and a flattening of the curve. Market expectations for an additional Federal Reserve rate hike have consequently decreased to around 40%.