Treasury yields end at highest levels in more than a week as PCE inflation data looms
Treasury yields end at highest levels in more than a week as PCE inflation data looms
U.S. government debt sold off on Wednesday, sending Treasury yields to their highest closing levels of the past one or two weeks in what strategists described as an otherwise uneventful session.
What happened
- The yield on the 2-year Treasury rose 5.8 basis points to 4.747%, after factoring in new-issue levels. Wednesday’s level is the highest since June 17, based on 3 p.m. Eastern time figures from Dow Jones Market Data.
- The yield on the 10-year Treasury rose 7.8 basis points to 4.315%, from 4.237% on Tuesday. Wednesday’s level is the highest since June 11.
- The yield on the 30-year Treasury climbed 7.5 basis points to 4.447%, from 4.372% on Tuesday. Wednesday’s level is the highest since June 12.
What drove markets
Traders are focused on Friday’s release of the personal-consumption expenditures price index report — the Federal Reserve’s preferred inflation gauge — for the month of May.
Comments from Federal Reserve officials in recent days have generally shown a desire to see further evidence of cooling inflation before starting to cut borrowing costs from a 23-year high of 5.25% to 5.50%.
Read: Inflation rate’s return to 2% could take several years: Cleveland Fed economist
Meanwhile, data released on Wednesday showed new-home sales plunged 11.3% in May. Separately, the Treasury’s $70 billion auction of 5-year notes was met with good demand from non-dealers.
What analysts are saying
“We expect core inflation to be back to the 2% target by early next year, allowing the Fed to begin cutting interest rates from this September,” said Paul Ashworth, chief North America economist at Capital Economics.
“GDP growth will remain a little lackluster this year but, as the shift in monetary policy begins to boost rate-sensitive spending, growth should reaccelerate in 2025 and beyond. The presidential election adds to the uncertainty. We are worried that tariffs and immigration curbs imposed in a second Trump administration could be stagflationary,” he said in a note.