Treasury yields finish higher despite May's PCE data, for two straight quarters of advances

By Vivien Lou Chen

Yields on long-term U.S. government debt finished at more than two-week highs on Friday amid a round of selling that may have been driven by traders moving to close out month- and quarter-end positions. Rates on 2-, 10- and 30-year Treasurys also ended the session with a second straight quarter of advances.

What happened

The yield on the 2-year Treasury BX:TMUBMUSD02Y finished marginally higher at 4.718%, versus 4.714% at 3 p.m. Eastern time on Thursday. The 2-year rate is up 47 basis points over the past two quarters, the largest advance over such a time frame since the period that ended on Sept. 29, 2023.The yield on the 10-year Treasury BX:TMUBMUSD10Y jumped 5.5 basis points to 4.342%, from 4.287% on Thursday. The yield on the 30-year Treasury BX:TMUBMUSD30Y rose 7.6 basis points to 4.502%, from 4.426% on Thursday.Friday's levels were the highest for the 10- and 30-year yields since June 11. In addition, 10- and 30-year rates have each gained 48.2 basis points over the past two quarters.

What drove markets

Yields began to reverse direction around 10:30 a.m. Eastern time and shoot higher on Friday as the bond-market rally triggered by the release of May's personal-consumption-expenditures inflation data faded. Strategists said the reversal may have had something to do with traders closing out various positions.

In data released on Friday, no increase in prices was seen in the PCE price index for May. The core PCE, which strips out particularly volatile items such as food and energy, rose 0.1% last month - matching the smallest increase in seven months as the 12-month rates of inflation and core inflation also eased.

In an interview with CNBC, San Francisco Fed President Mary Daly said May's PCE data shows that inflation is gradually cooling but that there is more work to do.Meanwhile, bond-market participants were focused on the U.S. fiscal outlook in the years ahead on Friday, a day after a televised presidential debate between Democrat Joe Biden and Republican Donald Trump.

-Vivien Lou Chen

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06-28-24 1555ET

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