Bond Report: Treasury yields move higher after U.S. inflation reading

by | Dec 23, 2022 | Stock Market

Treasury yields extended a rise Friday after the release of the U.S. personal consumption expenditure price index, the Federal Reserve’s preferred inflation indicator, and a raft of other economic data. Traders will see an abbreviated session, with Sifma recommending trading in U.S. bond markets end an hour early at 2 p.m. ET. U.S. markets will be closed Monday, Dec. 26, on observance of Christmas Day, which falls on Sunday.

What yields are doing
The yield on the 2-year Treasury note
TMUBMUSD02Y,
4.314%
was at 4.31%, up from 4.263% at 3 p.m. Eastern on Thursday. Yields and debt prices move opposite each other.

The 10-year Treasury note
TMUBMUSD10Y,
3.735%
yielded 3.721% versus 3.669% Thursday afternoon.

The yield on the 30-year Treasury bond
TMUBMUSD30Y,
3.809%
was 3.80%, up from 3.722% late Thursday.

Market drivers The personal-consumption expenditures index rose just 0.1% in November, marking the fifth month in a row in which inflation eased after peaking at a 40-year high over the summer. The yearly rate of inflation, meanwhile, slowed to 5.5% in November from 6.1% in the prior month, based on the personal-consumption expenditures index. That’s the smallest increase since October 2021. Federal Reserve policy makers view the PCE index as the best measure of inflation, particularly the core gauge that strips out volatile food and energy costs. The core index rose 0.2% last month, matching Wall Street’s forecast. Core inflation in the past 12 months relaxed to 4.7% from 5%. The core October reading was revised up to a 0.3% monthly rise from 0.2%. Other economic data released Friday included November durable-goods orders, which showed a 2.1% fall and the University of Michigan’s latest consumer sentiment reading, which ticked higher but remains weak. Short-dated yields had ticked higher Thursday after an upward revision to U.S. third-quarter gross domestic product data and resilient jobless benefit claims figures that underlined investor expectations the Federal Reserve will continue to raise its policy interest rate in the new year as it attempts to bring down inflation. A weak reading from the Conference Board’s leading index, however, kept pressure on yields at the long end in Thursday’s session, analysts said, underlining fears the economy could tip into recession.What analysts say Treasury prices “were modestly weaker in the run-up to this mo …

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