U.S. 10-year Treasury yield eases as traders brace for Wednesday's Fed decision

U.S. Treasury yields edged lower on Tuesday, a day before the Federal Reserve's interest rate decision.

The 10-year Treasury yield slipped 2.8 basis points to 4.394%. The 2-year yield was little changed at 3.916%, and the 30-year yield was down 3.4 basis points to 4.931%.

One basis point is 0.01%. Yields and prices move in opposite directions.

Fed funds futures traders are pricing in a 97% probability that rates will remain unchanged at 4.25%-4.5% at the meeting, according to the CME FedWatch measure of futures pricing.

“Odds are that it will be a non-event,” said Ed Yardeni, president of Yardeni Research.

“The only drama will be whether the FOMC sticks to the current party line: 'We are in no rush to lower interest rates.' Or, will it signal a dovish pivot?”

Similarly, Julius Baer's chief economist David Kohl said he expects the Fed to resume its rate-cutting cycle only at its FOMC meeting in September.

“If there is more certainty that the tariff-driven inflation spike is only transitory, the Fed will be able to adopt a neutral policy stance in 2026, with an additional two rate cuts of 25 basis points,” he said.

Investors will also be keeping an eye out for the personal consumption expenditures index for June, expected to be released on Thursday. The data, which is the Fed's preferred inflation gauge, is forecast to show inflation increasing from 2.3% to 2.4% year over year, according to FactSet. The report will also reveal the effects of tariffs on inflation.