U.S. debt bulls face a double test of inflation and a non-farm correction this week

Treasury bulls will face a double test of inflation and non-farm payroll revisions this week. The 2-year and 10-year Treasury yields closed last week at their lowest levels since early April, with traders fully pricing in a 25 basis point Fed cut in September and expecting further cuts before the end of the year. The focus of the week will begin on Tuesday, when the Bureau of Labor Statistics releases its preliminary benchmark revisions to the 2025 non-farm payroll survey data. Whether the market can extend this month's rally will depend in part on the tone of the PPI and CPI, which will be released on Wednesday and Thursday, respectively. Traders will also be watching how the market absorbs the 3-year, 10-year and 30-year Treasury auctions. Leslie Falconio, head of fixed income strategy at UBS, said: "The pace of rate cuts this year will be slow and methodical, and the data-dependent rhetoric will continue. A 50 basis point cut in September is very unlikely. Even if the inflation data is lower than market expectations, we won't see them act as aggressively." (Jin Ten)