BOND REPORT: Treasury Yields Tick Up After PCE Inflation Data

By Sunny Oh Features Dow Jones Newswires

10-year Treasury yield nears 2.40%, a key psychological level

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Treasury yields rose on Thursday after a key inflation number added no further clarity to the question of whether recent weakness in inflation was transitory or lasting.

What are yields doing?

The 2-year Treasury note yield was up to 1.766%, from 1.762% late Wednesday, while the 10-year note yield was up a basis point to 2.390%, versus 2.376%. The 30-year bond yield also rose a basis point to 2.827%, from 2.817%.

Bond prices move in the opposite direction of yields.

What's driving Treasurys?

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The personal consumption expenditure, or PCE, index, which is the Fed's preferred price gauge, rose 0.1% in October. And stripping out food and energy prices, the core index rose 0.2%, matching economists forecasts.

See: Consumers keep on spending in October, aided by rising incomes and low inflation (http://www.marketwatch.com/story/consumers-keep-on-spending-in-october-aided-by-rising-incomes-and-low-inflation-2017-11-30)

The central bank has highlighted its uncertainty over whether the recent bout of lackluster inflation readings would prove short-lived. For most investors, the disconnect between tight slack in the economy and middling inflationary pressures shows no sign of ending soon.

What did strategist say?

"Core inflation will probably remain subdued for a few more months, but most Fed officials believe this weakness to be transitory and the Fed still looks set to raise rates in December. Next year, we expect a more marked rebound in core inflation to prompt the Fed to hike rates more aggressively," said Andrew Hunter, U.S. economist for Capital Economics.

What else is on investors' radar?

Initial jobless claims fell by 2,000 to 238,000 (http://www.marketwatch.com/story/jobless-claims-fall-slightly-in-thanksgiving-week-layoffs-remain-near-45-year-low-2017-11-30)in the week ending Nov. 25. Economists surveyed by MarketWatch had forecasted claims to hit 240,000.

This week has proven particularly busy for those looking to glean clues on the likelihood of a December rate hike with plenty of Fed officials on the docket. Minneapolis Fed President Neel Kashkari hinted that he may oppose (http://www.marketwatch.com/story/feds-kashkari-suggests-he-may-dissent-again-in-december-2017-11-29)a widely expected December rate hike as inflation was too low for the central bank to "tap the brakes."

Cleveland Fed President Loretta Mester will moderate a panel discussion on "Financial Innovation and Macroprudential Policy." Dallas Fed President Robert Kaplan to take part in a moderated Q&A session in Dallas.

What assets are on the move?

The eurozone consumer price index numbers rose 1.5% year-on-year in November versus 1.4% the prior month. The French 10-year government bond yield fell 2.2 basis point to 0.692%.

(END) Dow Jones Newswires

November 30, 2017 09:29 ET (14:29 GMT)