U.S. Treasury yields climbed on Friday as investors awaited key inflation data that could inform the Federal Reserve’s next interest rate policy moves.
At 5:36 a.m. ET, the 10-year Treasury yield was up by over 2 basis points at 3.876%. The 2-year Treasury yield was also trading more than 3 basis points higher at 4.914%.
Yields and prices move in opposite directions and one basis point equals 0.01%.
Investors braced themselves for the release of the latest personal consumption expenditure price index, which is the Fed’s preferred inflation gauge. Economists surveyed by Dow Jones are expecting the core PCE to have risen by 0.3% in May, slightly less than April’s 0.4% increase. On an annual basis, a 4.7% rise is predicted, which would be in line with last month’s reading.
Personal spending and income figures will be released alongside the PCE report, which could impact Fed policy going forward.
Earlier this week, Fed Chairman Jerome Powell again indicated that rates would likely go higher still as he believes further restriction is necessary to lower inflation. The process of bringing inflation closer to the central bank’s 2% target range is also expected to take “a good while,” Powell added on Thursday.
Investors also digested recent economic data, including Thursday’s upward revision of the first quarter’s gross domestic product to 2%, compared to the previous 1.3% estimate.
This comes as concerns about elevated interest rates leading to a recession have spread among investors. On Wednesday, Fed Chair Powell said an economic downturn was a possibility, but not the most likely scenario.
