Stock Market

Treasury yields tick lower ahead of key inflation reading

U.S. Treasury yields pulled back Friday as investors awaited the April reading of the Federal Reserve’s favorite inflation measure in a holiday-shortened session.

What Treasury yields are doing
  • The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    2.728%

    fell to 2.739%, down from 2.756% at 3 p.m. Eastern.

  • The 2-year Treasury note yield
    TMUBMUSD02Y,
    2.471%

    was 2.46% versus 2.486% Thursday afternoon.

  • The 30-year Treasury bond yield
    TMUBMUSD30Y,
    2.950%

    pulled back to 2.965% from 2.991% late Thursday.

What’s driving the market

Treasury yields have fallen after rising earlier this month to levels last seen in late 2018. A scaling back of expectations for interest rate increases by the Federal Reserve this week has contributed to the pullback.

Investors will be paying close attention to the release of U.S. April personal consumption and expenditures data at 8:30 a.m. The core PCE inflation gauge is the Fed’s preferred measure of price pressures.

Economists surveyed by The Wall Street Journal look for the core measure to show a 4.9% year-over-year rise in April, down from a 5.2% pace in March.

Some Fed officials have indicated the central bank could pause after delivering a series of rate increases in coming meetings. The Fed kicked off the tightening cycle with a 25 basis point, or quarter of a percentage point, rate increase in March, followed by a half-point rise earlier this month. Two more half-point increases are on the table at coming meetings, according to Fed Chair Jerome Powell.

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April international trade data is also due at 8:30 a.m., while the University of Michigan’s consumer confidence index is set for 10 a.m.

U.S. markets will be closed Monday for the Memorial Day holiday. The Securities Industry and Financial Markets Association, an industry trade group, has recommended a 2 p.m. Eastern close for U.S. fixed-income trading on Friday.

What analysts say

“A series of weak economic data that drove the Citi Economic Surprise Index to one of its steepest four-week declines in the past 20 years has reinforced the perception that too fast a tightening cycle might accelerate the slowdown of the U.S. economy,” wrote economists at UniCredit Bank, in a Friday note.

“Encouraging reports from retail companies yesterday helped the stock market but did little to dispel market chatter about a possible pause in rate hikes,” they wrote. “Today’s release of April PCE data will be crucial in determining whether a more relaxed stance towards the Fed’s tightening prospects will prevail going into the weekend.”

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