The U.S. two-year Treasury yield fell 3 basis points to 4.97% on Tuesday after May CPI came in as expected, reinforcing a gradual disinflation trend without forcing an immediate shift in Federal Reserve policy. Consumer prices rose 0.3% in May and the annual rate eased to 3.3% from 3.4% in April, while core CPI rose 0.2% on the month and 3.4% on the year, all in line with forecasts. Futures markets then priced a 67% probability of a quarter-point rate cut in September, down from 75% a week earlier, while the chance of a July move remained negligible, according to the CME FedWatch Tool. Longer-dated Treasury yields also moved lower, with the 10-year yield down 2 basis points to 4.42% and the 30-year bond yield down 1 basis point to 4.58%. The move underscores how the two-year note, a key gauge of short-term Fed expectations, is reacting to a market that sees less need for further tightening but still lacks enough evidence to fully price in near-term easing. The Fed has kept its benchmark rate at 5.25%-5.50% since July 2023 and continues to stress a data-dependent approach, leaving upcoming employment and inflation readings central to the September decision.