Treasury yields eased Friday ahead of the release of key inflation data.

What’s happening

  • The yield on the 2-year Treasury
    was 4.51%, down 3.6 basis points. Yields move in the opposite direction to prices.

  • The yield on the 10-year Treasury
    was 3.8%, down 2.5 basis points.

  • The yield on the 30-year Treasury
    was 3.98%, down 1.8 basis points.

What’s driving markets

The Fed’s preferred inflation measure, the PCE price index, is due for release at 8:30 a.m. Eastern, alongside personal income and consumer spending numbers.

“The obvious potential catalyst is the upcoming core PCE Index. If we happen to see a softer reading on this key inflation gauge, it could offset some of the tough talk on rates that we have heard from Fed officials recently and take some steam out of the U.S. dollar,” said Tim Waterer, chief market analyst at KCM Trade.

Economists polled by The Wall Street Journal expect the core PCE price index to rise 0.3%, which would be a 4.6% year-over-year rise.

Traders also are looking at the state of debt-ceiling negotiations. Analysts at Goldman Sachs say the odds are highest the deal is announced late Friday or Saturday. They assigned an 80% chance on a full-fledged deal, and a 10% possibility of a short-term patch.

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