Treasury Yields Rise as Fed's Preferred Inflation Gauge, Payroll Costs Match Expectations

Treasury Yields Rise as Fed’s Preferred Inflation Gauge, Payroll Costs Match Expectations

Treasury yields climbed on Friday as the Federal Reserve’s favorite inflation gauge and an employment cost index for September broadly matched expectations, signaling nothing to derail the central bank from imposing another three-quarters percentage point rate hike to the economy at a policy meeting next week.

The moves came after traders absorbed stronger-than-expected gross domestic product growth of 2.6% in the United States, reported Thursday, along with a component of prices paid suggesting a weak sign of easing from inflationary pressure, and overnight news from Europe that German expansion was higher. than expected while Italian inflation accelerated.

Friday’s performance on the 10-year cash flow stood at around 4.006%, up around 7 basis points, a day after the yield fell 11 basis points on Thursday.

The Cash 2 years the yield last rose 10 basis points to 4.424%. It had fallen about 12 basis points on Thursday.

Yields and prices move in opposite directions and one basis point equals 0.01%.

Fed policymakers’ favorite measure of inflation is the personal consumption expenditure price index, and it showed inflation remained strong in September but mostly within expectations, the Bureau of Economic Analysis reported on Friday. .

The base rate, excluding food and energy, rose 0.5% from August and 5.1% over the past 12 months. The monthly gain was in line with Dow Jones estimates, while the yearly increase was slightly below the forecast of 5.2%.

Another data point on Friday showed employment costs rose 1.2% in the third quarter, in line with estimates, according to the Bureau of Labor Statistics. On an annual basis, the labor cost index rose 5%, slightly below the 5.1% pace recorded in the second quarter.

On Friday, the BEA reported separately that personal income rose 0.4% in September, a tenth of a percentage point above the estimate. Expenditure as measured by personal consumption expenditure rose 0.6%, more than the estimate of 0.4%.

However, once adjusted for inflation, spending only increased by 0.3%. Personal disposable income, or what’s left after taxes and other charges, rose 0.4% on the month, but was flat on an inflation-adjusted basis.

Reducing inflation has been the Federal Reserve’s top priority in 2022, prompting the central bank to raise interest rates since March. With another 75 basis point rate hike widely expected next week from the central bank, uncertainty has grown over the magnitude of the rate hike in December and how. which she will act during the coming winter.

— With reporting by Jeff Cox


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