The 10-year Treasury Yield Climbs for the First Time in Three Sessions as Pce Inflation Data is Due

On Wednesday morning, long-term U.S. government debt saw a selloff, but the 10-year yield continued to remain within a narrow range, which strategists predicted would lead to a relatively uneventful trading session.

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Here are the key developments:

• The yield on the 2-year Treasury remained largely unchanged at 4.733%, slightly up from 4.732% at 3 p.m. Eastern time on Tuesday.
• The yield on the 10-year Treasury rose by 6 basis points to 4.297%, up from 4.237% the previous day.
• The 30-year Treasury yield increased by 5.9 basis points to 4.431%, compared to 4.372% on Tuesday.

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The 10-year Treasury yield has been fluctuating between 4.2% and 4.3% for several sessions. Investors are awaiting a significant catalyst that could alter expectations regarding the Federal Reserve's interest rate policy. Recent statements from Federal Reserve officials suggest they want more evidence of cooling inflation before considering rate cuts from the current high range of 5.25% to 5.50%.

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Traders are particularly focused on the upcoming personal-consumption-expenditures (PCE) price index report for May, the Fed’s preferred measure of inflation, which will be released on Friday morning.

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In other economic news, data released on Wednesday indicated that new-home sales dropped by 11.3% in May. Additionally, the Treasury will announce the results of a $70 billion auction of 5-year notes at 1 p.m. Eastern time.

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Analysts have provided their insights:

• Paul Ashworth, the chief North America economist at Capital Economics, stated, “We expect core inflation to be back to the 2% target by early next year, allowing the Fed to begin cutting interest rates from this September.” He added that while GDP growth is likely to be somewhat lackluster this year, it should pick up in 2025 and beyond as the shift in monetary policy stimulates rate-sensitive spending. However, he also noted that the upcoming presidential election adds an element of uncertainty, particularly concerns about tariffs and immigration restrictions under a potential second Trump administration, which could lead to stagflation.

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Overall, the bond market remains in a holding pattern as investors look for clearer signals on inflation and Federal Reserve policy. The upcoming PCE report and other economic data will be critical in shaping market expectations and potential movements in Treasury yields.

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