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Saturday, December 03, 2022

US bond yields fall after hike in Fed’s preferred inflation index

US bond yields fall after hike in Fed's preferred inflation index

Pour Herbert Lasho

nuevaNew YorkSeptember 30 – US Treasury bond yields fell on Friday after a key inflation reading rose higher than expected, suggesting the Federal Reserve will continue to aggressively raise interest rates to control prices.

* The personal consumption expenditure price index rose 0.3% last month after falling 0.1% in July. In the 12 months from August, the price index PCE According to the Commerce Department, it rose to 6.2 percent from the previous month’s 6.4 percent.

* However, excluding food and energy, the measure rose 0.6 per cent last month after remaining unchanged in July and the so-called price index. PCE The core increased to 4.9% in August after 4.7% in July.

* “Principal and Core were both pretty bad,” said Stan Shipley, fixed income strategist at Evercore SI in New York.

* Two-year note yields, which generally move in step with rate expectations, initially rose after the data but later fell 0.5 basis points to 4.165%. The gap between the two-year and 10-year bond yields, early signs of a slowdown, narrowed slightly to -46.9 basis points.

* Shipley said the reading is not high enough for the Fed to change its rate-hike campaign, though he said core inflation will ease over the winter. The bank has raised borrowing costs faster this year than at any time since the 1980s.

* “It is not a good thing that the Fed is taking a step back,” he said. “The Fed is going to move on.”

* The yield on the 10-year bond fell 4.7 basis points to 3.700%, and the yield on the 30-year note fell 3 basis points to 3.663%.

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