The 10-year Treasury yield barely moved after July's core PCE reading matched forecasts, leaving Fed rate-hike bets largely unchanged ahead of the Jackson Hole symposium. Treasury Secretary Scott Bessent is meanwhile doubling bond buybacks to push down long-term borrowing costs that touched a 19-year high this month.
The 10-year Treasury yield stayed little changed at 4.645% Wednesday, as traders weighed the Federal Reserve's preferred inflation gauge after it came in mostly as expected. The 30-year bond yield held flat at 5.175%, while the 2-year note was unchanged at 4.205%.
Core PCE matches forecasts, headline runs hot
Core PCE, which excludes food and energy, rose 0.2% in July compared with June and 3.3% year over year, matching Dow Jones estimates. Headline PCE ran hotter, though: it rose 0.2% for the month and 3.7% for the year, both 0.1 percentage point above consensus.
The mixed reading didn't shift the market's rate hike outlook much. Fed funds futures now price a 40% probability of a quarter-point hike in September, up from 33% a week earlier, according to CME Group's FedWatch tool.
Bessent doubles bond buybacks to cap long-term rates
Treasury Secretary Scott Bessent will double buybacks of longer-dated bonds starting September 9, raising each operation from $2 billion to at least $4 billion and targeting 10- to 30-year maturities. The move follows the 30-year yield touching a 19-year high near 5.34% before the August 19 announcement.
Yields retraced most of their initial drop within two days; by August 20-21 the 30-year had settled in a 5.24% to 5.28% range while the 10-year hovered near 4.69%. The buyback program runs through November 4, and annual federal deficits now exceed $2 trillion, with the national debt past $40 trillion.
Jackson Hole and oil prices round out the backdrop
The data lands ahead of the Fed's Jackson Hole conference, where Chairman Kevin Warsh is expected to address persistently high inflation amid conflict in the Middle East; the symposium starts Thursday, with Warsh speaking Friday.
Oil offered some relief: Brent fell 2.8% to $86.08 a barrel while WTI dropped 3% to $79.93, as Iran and Oman near a deal over transit through the Strait of Hormuz.
The doubled buyback operations begin September 9, giving Bessent roughly two months to show they can hold long-term yields down.
Sources: US Top News and Analysis (CNBC), Crypto Briefing, US Top News and Analysis (CNBC)
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