Treasury yields fall following lower-than-expected U.S. inflation data
Quick Look
- Treasury yields declined on Wednesday after PCE inflation data came in lower than anticipated.
- The 10-year yield fell to 5.217%, while investors recalibrated expectations for Federal Reserve interest rate hikes following the report.
AI-generated summary
Why It Matters
The report follows recent data and Fed commentary that caused a repricing of monetary policy expectations. Investors had previously priced in an 80% chance of an October rate hike.
Treasury yields were lower on Wednesday following the release of much lighter-than-expected U.S. inflation data.
The 30-year Treasury bond was last nearly 3 basis points lower at 5.567%, after rising to its highest level since 2002 on Tuesday. The 10-year Treasury was down about 4 basis point to 5.217% and the 2-year Treasury note yield was 5 basis points lower at 4.889%.
One basis point is equal to 0.01%, and yields and prices move in opposite directions.
Excluding food and energy, the personal core expenditures price index (PCE) rose 3% year on year. Economists had forecast an increase of 3.3%. Headline PCE rose 3.4% year over year, also below expectations.
Investors awaited Wednesday's release after a recent spate of data and commentary from Federal Reserve officials led to a repricing of monetary policy expectations. At one point this month, traders priced in a more than 80% chance of a quarter-point rate hike in October. Those odds sat around 47% ahead of Wednesday's release, per the CME Group's FedWatch tool.
The PCE report follows new private payrolls data that was stronger than expected. Payrolls grew by 90,000 in September, according to data from ADP, topping a Dow Jones estimate of 68,000.
Open Questions
- How will the Federal Reserve respond to the latest PCE data?
