Treasury Yields Dip as Strong US Data Keeps Fed Hike Bets Alive

what happened

Treasury yields eased after the Federal Reserve held rates as expected, even as US economic indicators stayed robust, according to Market Talk, citing WSJ reporting.

Third-quarter GDP grew at an annualized 3.4%, up from 2.2%, beating the WSJ consensus of 3.1%. The Fed's preferred inflation gauge, PCE, rose 3.6% over the 12 months through September, up from 3.4% in August but below the 3.7% consensus. Core inflation accelerated to 3.1% from 3%, in line with expectations. Weekly initial jobless claims fell to 194,000 from an upwardly revised 195,000, with layoffs still in a tight range.

According to CME, markets are pricing in a Fed rate hike in December. The 10-year yield fell to 5.011% from Tuesday's settlement of 5.044%, while the two-year slipped to 4.695% from 4.731%.

why it matters

Strong growth combined with inflation running above target strengthens expectations of tighter Fed policy. For markets, the next moves in yields will likely hinge on upcoming inflation and labor data and on any signals from the Fed ahead of its December meeting.

market impact

US Treasuries and the dollar: strong data and hike expectations keep yields elevated

• ↔US Treasuries mixed — strong GDP and hike expectations push prices down, while softer PCE supports them

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