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The Treasury Yield Stays Steady After the Fed's Favored Inflation Data

August 31, 2023
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During Thursday morning's trading, Treasury yields exhibited minimal movement following the release of core readings from the Federal Reserve's preferred inflation metric for the month of July, which closely matched economists' projections.

The specifics of the yield adjustments are as follows:

  • The yield on the 2-year Treasury (BX:TMUBMUSD02Y) experienced a slight decrease to 4.88%, as opposed to the previous 4.884% recorded on Wednesday.
  • The yield on the 10-year Treasury (BX:TMUBMUSD10Y) witnessed a modest decline of less than 1 basis point, retreating from 4.117% on Wednesday afternoon to 4.108%.
  • The yield on the 30-year Treasury (BX:TMUBMUSD30Y) recorded a decline of 1.4 basis points, settling at 4.212% subsequent to the 4.226% reported late Wednesday.

The driving forces behind these yield movements are as follows:The data released on Thursday revealed a gradual increase in the Fed's favored inflation metric for July. The personal consumption expenditure price index indicated a modest rise of 0.2%. Concurrently, the year-over-year analysis displayed a climb in prices to 3.3%.

The narrower core gauge, which excludes food and energy components, aligned with expectations by reflecting a month-on-month increase of 0.2%. Over the past year, this gauge exhibited a rise of 4.2%.

Market sentiments are currently factoring in a 90.5% likelihood that the Federal Reserve will maintain interest rates within a range of 5.25% to 5.5% during its September 20 meeting, according to the CME FedWatch Tool. Furthermore, the probability of a 25-basis-point rate hike in the subsequent November meeting, to establish a range of 5.5% to 5.75%, is currently assessed at 43.8%, a marginal decrease from the 45.5% probability reported the previous day.

Other updates in the U.S. economic landscape reveal that initial jobless claims declined by 4,000 to reach 228,000 for the week ending on August 26, marking the lowest level of claims over a span of four weeks.

In the European context, the 10-year German bund yield (BX:TMBMKDE-10Y) has decreased by 4.4 basis points to 2.504%, a movement attributed to data surrounding the eurozone's consumer prices index.

Cathy Hills
Associate Editor
Eric Ng
John Liu
Editorial Board
Bryan Curtis
Adan Harris
Managing Editor
Cathy Hills
Associate Editor

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