Prices took a smaller step up than anticipated in August. According to the Commerce Department, the personal consumption expenditures price index rose 0.3% for the month and 3.4% over the past year. Economists polled by Dow Jones had penciled in 0.3% and 3.7%.
On the core measure that omits food and energy, PCE rose 0.2% in August and 3% from a year earlier, lighter than forecasts for 0.3% and 3.3%. While the Fed officially tracks headline PCE, officials often lean on the core gauge for a read on longer term trend pressures.
Bond yields initially slipped on the softer inflation read, then edged back up as attention shifted to Friday's jobs report. The 2 year yield fell just over 6 basis points to 4.827%. The 10 year ticked up by 1 basis point to 5.268% after a short dip earlier in the session, and hovered near levels last seen in 2007.
The 30 year added nearly 3 basis points to 5.623%, close to highs not seen since 2002. One basis point is 0.01%, and yields move opposite to bond prices.
Yields at these levels change what every other asset is worth, and that is worth understanding before the next print lands. Our CEO Jaspreet Singh wrote ABB: Always Be Buying, a free e-book that walks through the step-by-step investing system we use to build wealth through any market. Read it free.
A quick read across the curve: the U.S. 10 Year sat at 5.27% (up 0.015), the 1 Month at 3.935% (up 0.002), the 1 Year at 4.529% (down 0.046), the 2 Year at 4.86% (down 0.029), the 30 Year at 5.625% (up 0.031), the 3 Month at 4.138% (down 0.034), and the 6 Month at 4.332% (down 0.04).
After a run of hawkish Fed speak, markets at one point this month had priced better than an 80% chance of a quarter point October hike.
Next up is the September employment report at 8:30 a.m. ET on Friday, with economists looking for 84,000 jobs added. A hotter print - similar to the stronger ADP private payrolls report on Wednesday - could lift yields again. As FWDBONDS chief economist Christopher Rupkey put it, "Net, net, the inflation fire is not burning as hot as markets expected in August, and bond yields are adjusting their sails as investors rethink exactly how many Fed rate hikes might be needed to keep inflation moving back down to target." For your wallet, that back and forth in yields shapes everything from mortgage quotes to what your savings account pays, so the jobs number could ripple straight through to your everyday rates.
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