Treasury Yields Drop Ahead of Inflation Data; Fed’s Rate Outlook Unclear

In today’s article, U.S. Treasury yields decreased due to investors processing Thursday’s GDP report and anticipating important inflation figures scheduled to be released later on. At 3:59 a.m., the yield for the 10-year Treasury dropped by over three basis points, settling at 4.6754%. The two-year Treasury also decreased by more than one basis point and settled at 4.9850%. Yields decline as prices increase because they move inversely. Thirsty Thursday had previously resulted in record-high levels for both the ten-year and two-year yields, following a disappointing GDP report that fell significantly below forecasted numbers by economists polled by Dow Jones. This particular announcement revealed consumer costs skyrocketing far beyond what was reported during Q1 2018. With tomorrow’s release of personal consumption expenditures price index (PCE), the Fed’s preferred inflation indicator, fresh insights into this ongoing issue are expected to surface. According to analyst predictions cited by Dow Jones survey responses, monthly increases will have climbed a percentage point at each junction when measuring yearly growth: 0.3% for headline PCE and 2.6% from the previous year; while core-PCE (which excludes food & energy costs) is expected to rise by an additional 0.3%, with annual increases remaining unchanged at a rate of 2.7%. As the Fed prepares to convene next week, it’s uncertain what sort of guidance regarding interest rates policymakers may offer following recent uncertainty over how many less cuts could be anticipated this year or whether any will occur until as late as 2025 – an issue that has arisen in light of market expectations for the first rate cut being pushed back.