US Treasury yields climbed on Wednesday following the release of higher-than-expected inflation data from Canada and Australia, sparking fears of what the upcoming May Personal Consumption Expenditure (PCE) Price Index report in the United States could reveal. The 10-year Treasury bond yield rose to 4.320%, its highest level since mid-June, as global bond yields jumped in response to the data.
The increase in US yields had a negative impact on Gold prices, pushing them to a two-week low of $2,293 before stabilizing around $2,297. This was driven by data from Canada showing a hotter-than-expected inflation rate, and Australia’s Consumer Price Index (CPI) hitting a six-month high of 4%, well above the Reserve Bank of Australia’s inflation target.
Investor focus this week will be on the May PCE report, which is expected to show a slight decrease in both headline and core inflation rates. The Federal Reserve’s preferred gauge for inflation, the PCE, is forecasted to drop from 2.7% to 2.6% year-over-year, while core PCE is anticipated to be 2.6% for the twelve months leading up to May, down from 2.8%.
In addition to the May PCE report, other significant data releases this week include the final reading of the Q1 2024 Gross Domestic Product (GDP), Durable Goods Orders, and Initial Jobless Claims. The US economy is closely monitored for any signs of inflation and the impact it may have on monetary policy decisions by the Federal Reserve.
Traders are anticipating potential easing measures as indicated by data from the Chicago Board of Trade (CBOT), which shows expectations of a 36-basis-point rate cut according to December 2024 fed funds rate futures contracts. The CME FedWatch Tool also shows odds of a 25-basis-point rate cut in September at 56.3%, slightly lower than the previous day’s 59.5%. Market participants are closely monitoring these developments for any signs of potential market impacts.
Overall, the increase in global bond yields driven by higher-than-expected inflation data from several countries has raised concerns about inflationary pressures and their potential impact on monetary policy and financial markets. The upcoming release of the US May PCE report will be closely watched for further insights into inflation trends and potential implications for the Federal Reserve’s policy decisions in the near future.
