Treasury yields slid Wednesday as a key inflation reading met expectations.
The yield on the 10-year Treasury fell almost 5 basis points to 4.256%. The 2-year Treasury yield dipped 3.3 basis points to 4.221%.
One basis point equals 0.01%, and yields and prices move in opposite directions.
The October personal consumption expenditures price index, a broad measure that the Fed favors as its primary inflation gauge, increased 0.2% on the month and 2.3% over the past year. Both were in line with the Dow Jones consensus forecast, although the annual rate was higher than the 2.1% level in September. Excluding food and energy, core inflation increased 0.3% on a monthly basis and 2.8% in one year, also in-line with economists’ expectations.
“Overall, there was nothing in the data set that would alter the Fed’s thinking regarding a cut/pause next month,” Ian Lyngen, BMO’s head of U.S. rates, said in a note.
Also reported Wednesday, initial claims for unemployment benefits last week fell by 2,000 to 213,000 for the week ended Nov. 23, a sign that the U.S. labor market remains tight. Economists polled by Dow Jones expected claims to come in at 215,000.
A summary of the Fed’s meeting minutes from November published Tuesday showed Fed officials confident that inflation is easing and that further interest rate cuts will happen, albeit at a gradual pace.
“In discussing the outlook for monetary policy, participants anticipated that if the data came in about as expected, with inflation continuing to move down sustainably to 2 percent and the economy remaining near maximum employment, it would likely be appropriate to move gradually toward a more neutral stance of policy over time,” the minutes said.
Traders are now pricing in a 70% chance that the Fed will cut rates by another quarter point at its next policy meeting in December, with 30% expecting no change, based on prices for interest rates as tracked by the CME Group’s FedWatch Tool. The Fed slashed rates a half a percentage point in September and another quarter point earlier this month, lowering its benchmark rate to the current range of 4.50% to 4.75%.
Meanwhile, President-elect Donald Trump’s pick of Scott Bessent as Treasury secretary has continued to calm investors this week. As a fiscal conservative, Bessent is expected to prioritize market stability and economic growth.