Treasury yields end mostly higher after subdued U.S. inflation reading in holiday-shortened session

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Yields on U.S. Treasurys finished mixed during Friday’s preholiday shortened session after data showed inflation continuing to slow in November and moving toward the Federal Reserve’s target.

What yields did

  • The yield on the 2-year Treasury note
    BX:TMUBMUSD02Y
    fell 1.1 basis points to 4.338% at 2 p.m. Eastern, its lowest closing yield since May 23, according to Dow Jones Market Data. Yields and debt prices move opposite each other.

  • The 10-year Treasury note
    BX:TMUBMUSD10Y
    rose 1.4 basis points to 3.907%.

  • The 30-year Treasury bond yield
    BX:TMUBMUSD30Y
    ended 2.5 basis points higher at 4.059%.

What happened

Treasury yields initially ticked higher after the government said the personal-consumption expenditures, or PCE, index dipped 0.1% last month. Year-over-year inflation slowed to 2.6% from 2.9% in October, the lowest since February 2021.

The more closely followed core PCE rate that excludes food and energy rose 0.1% in November, matching the forecasts of economists polled by The Wall Street Journal. The increase in the core rate over the past 12 months decelerated to 3.2% from 3.4% in the prior month. That’s also the smallest increase since early 2021.

Live blog: PCE report for November

Yields subsequently pulled back but then drifted back to the upside over the course of the session.

In other data, consumer sentiment ended the year on a high note, based on an index from the University of Michigan. Orders for durable goods rebounded 5.4% in November, the government said Friday, the largest gain since July 2020. And new home sales plunged last month.

U.S. bond traders had a shortened session on Friday after Sifma called for a 2 p.m. Eastern time close. Meanwhile, U.S. equity markets continued with a full day of trading. Financial markets are closed Monday for Christmas Day.

What analysts say

“It was a softer inflation print to be sure, although we’ll argue the market was biased for a downside surprise which has translated to a somewhat counterintuitive price response,” said Benjamin Jeffery, rates strategist at BMO Capital Markets, in a note.



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