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The U.S. 10-year Treasury rose on Thursday as investors looked ahead to a key inflation report due on Friday.
The yield on the 10-year Treasury traded 2 basis points higher at 3.863%, while the yield on the 2-year Treasury gained nearly 3 basis points to 3.893%.
Yields and prices move in opposite directions. One basis point equals 0.01%.
It comes as market participants await a fresh batch of economic data, with focus set to turn to the U.S. Federal Reserve’s preferred inflation gauge on Friday. Economic data released Thursday showed that weekly jobless claims fell from the prior week, further easing recession concerns. In addition, second-quarter gross domestic product was revised higher to 3% growth from an initial 2.8% rate.
The U.S. personal consumption expenditures price index will be published on the last trading day of August. The reading could offer more clues on the outlook for interest rates. Federal Reserve officials use the measure as their main baseline to gauge inflation.
Fed Chair Jerome Powell said late last week that “the time has come for policy to adjust,” bolstering expectations for a rate cut at the central bank’s next meeting. Powell declined to provide exact indications on the timing or extent of the cut, however.
Market participants are firmly pricing in a rate cut at the Fed’s Sept. 18 meeting. Traders are currently pricing in a roughly 65.5% chance of a 25-basis-point rate cut next month, with 34.5% pricing in a 50-basis-point rate cut, according to the CME Group’s FedWatch Tool.
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