Yields on U.S. Treasurys Stabilize Amid Slowing Inflation
Slowing inflation in the U.S. leads to stabilization of yields on Treasurys. Durable goods orders experience a rebound in November.
The latest data shows that inflation in the U.S. continued to slow in November, bringing it closer to the Federal Reserve's target. As a result, yields on U.S. Treasurys were largely unchanged or slightly lower this morning in a shortened trading session ahead of Christmas.
Following the release of the government's report, Treasury yields initially rose. The personal-consumption expenditures (PCE) index showed a 0.1% decline in November, with year-over-year inflation slowing to 2.6% from 2.9% in October, the lowest since February 2021.
The core PCE rate, which excludes food and energy, increased by 0.1% in November. This growth was lower than the 0.1% increase predicted by economists. Over the past 12 months, the core rate decelerated to 3.2% from 3.4% in the previous month. This marks the smallest increase since early 2021.
In other economic news, the government reported that orders for durable goods rebounded by 5.4% in November. This marks the largest gain since July 2020.
U.S. bond traders will have a shortened session, with a 2 p.m. close, while U.S. equity markets will have a full day of trading. Financial markets will be closed on Monday in observance of Christmas Day.
"It was a softer inflation print to be sure, although we’ll argue the market was biased for a downside surprise which has translated to a somewhat counterintuitive price response" initially, noted Benjamin Jeffery, rates strategist at BMO Capital Markets, in a note.