The 10-year Treasury yield is up by 10 bps this week to 4.141% and is on track for its largest weekly gain since June. The yield is up by 2.9 bps on Friday as investors digest September’s cooler-than-expected core Personal Consumption Expenditures (PCE) index, which was delayed due to the government shutdown that ended on November 12.
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Core PCE rose by 0.3% from the prior month and 2.8% on an annual basis. Economists were expecting increases of 0.3% and 2.9%, respectively. Following the data, the odds of a 25 bps rate cut at the December 9-10 Federal Open Market Committee (FOMC) meeting remain elevated at 87.2%.
10-Year Yield Climbs on Mixed Labor Data and Hawkish Fed Outlook for 2026
The 10-year yield has reacted to several data points this week, including November layoffs hitting a three-year high and initial jobless claims falling to a three-year low. A rising 10-year yield potentially signals that investors expect higher inflation and fewer rate cuts ahead.
“Expectations have been adjusted in a more hawkish direction for the Fed,” said Deutsche Bank U.S. rates strategist Steven Zeng. “Investors are growing skeptical of more rate cuts next year.”
Furthermore, National Economic Council Director Kevin Hassett is widely expected to be President Trump’s nominee to replace Fed Chair Jerome Powell, a move that could lead to a new era of monetary policy.
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