US Treasury Yields Rise Amid Inflation, Debt, Rate Cut Bets

U.S. financial markets are closely watching the upcoming July 2025 Consumer Price Index (CPI) report, expected to influence Federal Reserve policy and Treasury yields. Inflation pressures, particularly from tariffs and goods-sector prices, remain a key concern, with core CPI projected to rise around 3% annually, potentially complicating the Fed's plans for rate cuts despite market expectations of easing. Longer-term Treasury yields are anticipated to rise modestly due to inflation worries and heavy debt issuance, while short-term yields are falling amid bets on Fed rate reductions. The yield curve reflects this tension, with a flattening shape signaling cautious market sentiment about inflation's persistence and economic growth. Concurrently, stock markets remain stable near recent highs, buoyed by a strong earnings season yet mindful of geopolitical developments such as U.S.-China trade tensions and talks between President Trump and Vladimir Putin on Ukraine. Overall, the markets face a delicate balance between inflation data, Fed policy decisions, and global events that will shape economic trajectories in the near term.