US Treasury yields fall from three-month highs in volatile session

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Benchmark U.S. Treasury yields fell on Wednesday after hitting three-month highs as investors waited for next week’s inflation data to offer the next clue about the likely Federal Reserve interest rate path.

* Concerns that inflation will remain stubbornly high if energy prices rise before winter have weighed on global government bond yields in recent weeks.

* US central bank officials including Cleveland Fed President Loretta Mester and Fed Vice President Lael Brainard will speak on Wednesday, with Fed Chairman Jerome Powell speaking on Thursday.

* They are likely to maintain an aggressive stance towards further rate hikes at a time when they are battling still high inflation in the US and mounting price pressures in Europe.

* However, with investors awaiting US consumer price inflation data for August to be released next Tuesday, it is unlikely to offer any new insights.

* Markets expect the Fed to raise rates another 75 basis points at its September 20-21 meeting, which would take the fed funds rate into the 3.0%-3.25% range.

* The European Central Bank is also expected to make a second big rate hike on Thursday.

* Treasury bond yields fell despite companies including Walmart (NYSE: WMT ) Inc tapping into the corporate debt market for new financing. Yields rose on Tuesday as banks hedged a slew of corporate issuance expected this week.

* Yields on the 10-year note were trading at 3.300%, having earlier hit 3.365%, the highest level since June 16. They have risen from a four-month low of 2,516% on August 2, but remain below the 11-year high of 3,498% reached on June 14.

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* The two-year yield, sensitive to interest rates, was trading at 3.481% and remains below the 3.551% level reached on Thursday, which was the highest since November 2007.

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