Treasury yields little changed after cooler PCE inflation data

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Cooler-than-expected PCE inflation data supports a likely 25-basis-point Fed rate cut next week, lifting Treasury yields slightly as markets price in dovish policy easing.

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U.S. Treasury yields rose slightly after the September PCE inflation report showed core and headline inflation at 2.8% annually—slightly below expectations—reinforcing expectations of a Fed rate cut next week. The data eased concerns about labor market weakness despite recent job cuts, with yields on 10-year and 30-year Treasuries rising over 2 and 3 basis points, respectively.

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A trader works on the floor at the New York Stock Exchange (NYSE) in New York, US, on Monday, Nov. 17, 2025.

U.S. Treasury yields rose on Friday as investors heard that the inflation measure most closely watched by the Federal Reserve was lower than expected in September, the most recent available because of the long government shutdown in October and November.

Ahead of the central bank's last policy meeting of the year next week, the 10-year Treasury yield gained more than 2 basis points to 4.135%, while the the 30-year bond yield added more than 3 basis points to 4.797%. The 2-year Treasury yield also traded up more than 2 basis points to 3.56%.

One basis point is equal to 0.01% and yields and prices move in opposite directions.

The core personal consumption expenditures price index, which excludes volatile food and energy prices, showed a 0.2% monthly rise while the annual rate was 2.8%. The monthly rate was in line with the consensus among economists surveyed by Dow Jones, but the annual level was 0.1 percentage point lower.

The headline PCE increased 0.3% in September, putting the annual inflation rate also at 2.8%, according to the Commerce Department's Bureau of Economic Analysis. Both those readings were in line with expectations.

All told, the PCE report gives a further green light for the Federal Reserve to lower interest rates as is widely expected by a quarter percentage point next week, which would drop the benchmark overnight lending rate to 3.50%-3.75%.

"Overall, the data was consistent with another 25 bp Fed cut next week, but it doesn't suggest any urgency for the Fed to accelerate the pace of cuts in 2026," wrote Ian Lyngen of BMO Capital in a note.

Separately, the preliminary reading of consumer sentiment in December from the University of Michigan was 53.3 versus Wall Street's expectation of 52.0.

Friday's numbers helped to dash concern about a slowing U.S. labor market. On Thursday, job placement firm Challenger, Gray & Christmas said that layoffs, AI and tariffs contributed to job cuts soaring above 1 million in 2025 for the first time since the pandemic. Processor ADP on Wednesday said private payrolls declined by 32,000 workers in November.

A trader works on the floor at the New York Stock Exchange (NYSE) in New York, US, on Monday, Nov. 17, 2025.

U.S. Treasury yields rose on Friday as investors heard that the inflation measure most closely watched by the Federal Reserve was lower than expected in September, the most recent available because of the long government shutdown in October and November.

Ahead of the central bank's last policy meeting of the year next week, the [10-year Treasury](https://www.cnbc.com/quotes/US10Y/) yield gained more than 2 basis points to 4.135%, while the the [30-year bond yield](https://www.cnbc.com/quotes/US30Y/) added more than 3 basis points to 4.797%. The [2-year Treasury](https://www.cnbc.com/quotes/US2Y/) yield also traded up more than 2 basis points to 3.56%.

One basis point is equal to 0.01% and yields and prices move in opposite directions.

The core personal consumption expenditures price index, which excludes volatile food and energy prices, showed a 0.2% monthly rise while the annual rate was 2.8%. The monthly rate was in line with the consensus among economists surveyed by Dow Jones, but the annual level was 0.1 percentage point lower.

The headline PCE increased 0.3% in September, putting the annual inflation rate also at 2.8%, according to the Commerce Department's Bureau of Economic Analysis. Both those readings were in line with expectations.

All told, the PCE report gives a further green light for the Federal Reserve to lower interest rates as is widely expected by a quarter percentage point next week, which would drop the benchmark overnight lending rate to 3.50%-3.75%.

"Overall, the data was consistent with another 25 bp Fed cut next week, but it doesn't suggest any urgency for the Fed to accelerate the pace of cuts in 2026," wrote Ian Lyngen of BMO Capital in a note.

Separately, the preliminary reading of consumer sentiment in December from the University of Michigan was 53.3 versus Wall Street's expectation of 52.0.

Friday's numbers helped to dash concern about a slowing U.S. labor market. On Thursday, job placement firm [Challenger, Gray & Christmas](https://www.cnbc.com/2025/12/04/layoff-announcements-this-year-top-1point1-million-the-most-since-2020-when-pandemic-hit-challenger-says.html) said that layoffs, AI and tariffs contributed to job cuts soaring above 1 million in 2025 for the first time since the pandemic. Processor ADP on Wednesday said [private payrolls declined](https://www.cnbc.com/2025/12/03/adp-jobs-report-november-2025-private-payrolls-unexpectedly-fell-by-32000-.html) by 32,000 workers in November.

Treasury yields little changed after cooler PCE inflation data

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