Treasury Yields Rise Ahead of Thursday's PCE Inflation
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- U.S. Treasury yields rose on Tuesday ahead of Thursday's PCE data, with the benchmark 10-year yield climbing over 3 basis points to 4.483% and the 2-year yield — which tracks Fed rate expectations — up over 3 basis points to 4.213%.
- The 30-year Treasury bond yield rose over 1 basis point to 4.919%, and yields moved higher despite a fall in oil prices as trading resumed after Friday's public holiday.
- Thursday's release of May's PCE price index is the key market test this week, with economists polled by FactSet expecting core PCE to increase from April.
- Last week's Fed meeting, Kevin Warsh's first as chairman, ended with a more hawkish bias than many market watchers expected, pulling rate-hike expectations forward to as soon as October.
- The FOMC removed key language from a dramatically shorter policy statement that had previously indicated a bias toward future rate cuts, while holding the federal funds rate steady at 3.5%-3.75%.
Why it matters: The FOMC under Chair Warsh already pivoted hawkish last week, dropping prior rate-cut language and pulling rate-hike expectations to as soon as October — the 10-year's move above 4.48% shows the bond market is pricing in that shift. Thursday's core PCE print, which FactSet-polled economists expect to accelerate from April, is the next data point that will either validate the Fed's new posture or give the bond market reason to ease.
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