US bond yields fall after PCE index comes in below expectations; investors raise bets Fed will hold rates in October

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US Treasury yields fell today after the Commerce Department reported that the personal consumption expenditures (PCE) price index for August came in below expectations, easing investors' concerns about inflation and interest rate hikes by the Federal Reserve. The headline PCE index rose 3.4% year-on-year, below analysts' forecast of 3.7%, and rose 0.3% month-on-month, below the expected 0.4%. The core PCE index, which excludes food and energy, rose 3.0% year-on-year, below the expected 3.3%, and rose 0.2% month-on-month, below the expected 0.3%. The yield on the 30-year US Treasury note fell to 5.578% after surging yesterday to its highest level since 2002. The 10-year yield, the main benchmark for mortgages, auto loans and credit card debt, fell to 5.217% after surging yesterday to its highest level since 2007. The 2-year yield fell to 4.827%. The latest CME Group FedWatch Tool indicates that investors now assign a 62.9% probability to the Fed holding rates at 3.75-4.00% at its October meeting, up from 49.1% yesterday, and a 37.1% probability to a 0.25% rate hike to 4.00-4.25%, down from 50.9% yesterday.

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