10-year Treasury yield are higher as traders look past inflation data, await jobs report — SkimNews
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- 10-year Treasury yield rose nearly 4 basis points to 5.293%, trading near 2007 highs, while the 30-year climbed 5 bps to 5.644%, around its highest level since 2002, and the 2-year was little changed at 4.887%.
- PCE inflation came in lighter than expected, with the headline index up 0.3% in August and the 12-month gain at 3.4% versus the 3.7% economists forecast; core PCE rose 0.2% for a 3% annual rate against the 3.3% expected.
- Christopher Rupkey, chief economist at FWDBONDS, wrote that bond yields are "adjusting their sails" as investors rethink how many Fed rate hikes are needed to bring inflation back to target.
- Fed rate hike odds for a quarter-point October move dropped from over 80% earlier this month to roughly 37% after the inflation release, with traders now pricing the next increase for December, according to CME Group's FedWatch tool.
- September jobs report, due Friday at 8:30 a.m. ET, is expected to show 84,000 jobs added; the article notes that a hotter-than-expected print, following Wednesday's hotter ADP private payrolls report, could push yields higher.
- ADP private payrolls report came in hotter than expected on Wednesday, cited in the article as a potential warning sign that Friday's official data could reinforce the upward yield trend.
Why it matters: Traders are pricing fewer near-term Fed rate hikes despite yields still climbing to multi-year highs — a disconnect that hinges entirely on Friday's jobs report. If the 84,000 consensus is exceeded, the repricing toward a December hike could accelerate, keeping the 10-year near 5.29% and pushing borrowing costs for mortgages and corporate debt even higher.
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