3 hrs ago
US Yields Rise as Inflation Cools, Fed Hike Bets Ease
US government bond yields went up after new inflation data was released.
Inflation rose more slowly than many investors expected in August.
This made investors less likely to expect an interest-rate increase next month.
However, bond yields still remain high because inflation and borrowing costs continue to concern markets.
The 10-year bond yield reached its highest level since 2007.
A Federal Reserve official had recently suggested that another rate increase might not be urgent.
Some analysts still believe inflation is causing serious problems for consumers and businesses.
Investors will now watch comments from Federal Reserve officials and a jobs report due Friday.
The US 10-year Treasury yield rose 4.68 basis points to 5.302%, its highest level since mid-June 2007.
August core PCE inflation remained at 3.0% year over year after a downwardly revised 3.0% increase in July.
Markets priced a 63% chance that the Federal Reserve will keep rates unchanged next month, up from 55% before the data.
The 30-year Treasury yield reached 5.6482%, its highest level since June 2002, while the 2-year yield was nearly flat.
Investors will watch Federal Reserve officials and September payrolls data for further clues about interest-rate policy.
- Who
- Investors, the Federal Reserve, and US Treasury markets were central to the developments.
- What
- Longer-dated US Treasury yields rose while market expectations for an October Federal Reserve rate hike eased.
- Where
- In US financial markets.
- When
- On Wednesday, September 30, after the August inflation data was released.
- Why
- August core PCE inflation held at 3.0% year over year, below some expectations, although investors remained concerned about persistent inflation and elevated oil prices.
Markets and Cooling Inflation
Persistent Inflation Concerns
Need for another rate hike
Markets and Cooling Inflation
The August core PCE figure was below consensus expectations, and markets increased the probability that the Federal Reserve will leave rates unchanged next month.
Persistent Inflation Concerns
Luis Alvarado of Wells Fargo Investment Institute said affordability pressures remain significant, that the Federal Reserve is still behind the curve, and that further action may be needed to restrain inflation.
Key facts
- 10-year yield
- 5.302%, up 4.68 basis points and the highest since mid-June 2007
- 30-year yield
- 5.6482%, up 5.42 basis points and near its highest level since June 2002
- 2-year yield
- 4.891%, up 0.21 basis points after falling earlier
- Core PCE inflation
- 3.0% year over year in August, following a downwardly revised 3.0% increase in July
- Rate decision odds
- Markets priced a 63% chance of no rate change next month, compared with 55% before the inflation release
- September private payrolls
- Employment increased by 90,000 jobs, compared with consensus expectations for 70,000
- Upcoming data
- The September nonfarm payrolls report is due Friday
Quotes
Luis Alvarado
Co-head of global fixed income strategy at Wells Fargo Investment Institute
“The actual inflation experience and the pain in affordability that consumers and businesses are feeling is still alive and well. This one data point does not change the trend that we have been experiencing. The Fed is still behind the curve and needs to act further to rein in inflation.”
livemint.com
“Core PCE came in lower than the consensus expectation but the market already knew that the changes in how the number was calculated were going to impact the number.”
livemint.com
Sources
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