U.S. Treasury yields fell Friday after the Federal Reserve’s preferred inflation gauge matched expectations ahead of the central bank’s monetary policy meeting next week.
The yield on the 10-year Treasury fell 6 basis points to 4.193%. The 2-year Treasury yield was last at 4.385%, down more than 5 basis points.
Yields and prices have an inverted relationship. One basis point equals 0.01%.
The June personal consumption expenditures price index released Friday by the Commerce Department showed a rise of 0.1% on the month and a 2.5% gain from the year-ago period, in line with what economists surveyed by Dow Jones were estimating.
The report further cemented the case for a September rate cut ahead of the Fed’s meeting next week. The central bank is widely anticipated to leave interest rates unchanged at the July meeting, but investors are hoping for clearer signals of when rates will be lowered, and how many cuts are likely this year.
Markets were last pricing in a 100% likelihood that the benchmark fed funds borrowing rate will fall from its current 5.25%-5.50% at the Fed’s September meeting, according to the CME FedWatch Tool.
The latest inflation data comes after a raft of mixed signals this week on the state of the U.S. economy. A preliminary reading of gross domestic product for the second quarter showed annualized growth of 2.8%, surpassing economists’ estimates.
Earlier in the week, however, data from the manufacturing sector came in slower than expected, with the U.S. purchasing managers index and flash manufacturing output index showing a contraction.
— CNBC’s Jeff Cox contributed to this report.
