30.09.202612:58:10UTC+0010Y Treasury Yield Holds Near 2007 Highs

The US 10-year Treasury yield hovered around 5.25% on Wednesday, holding near its highest level since 2007 as investors digested a series of economic reports. The PCE price index rose 0.3% in August, below the 0.4% consensus forecast, while core PCE increased 0.2%, also undershooting expectations. On a year-over-year basis, headline PCE inflation came in at 3.4%, compared with expectations of 3.7%.

At the same time, final Q2 GDP data showed the US economy expanded at a 2.2% annualized rate, up from a previous estimate of 1.5%. The ADP report also indicated that private-sector job creation in September surpassed projections.

Treasury yields remain elevated, supported by persistent energy-related inflation pressures, a still-resilient US economy and hawkish messaging from the Federal Reserve that has reinforced expectations of further policy tightening. However, New York Fed President John Williams noted that the central bank does not need to rush into another rate increase following this month’s hike.

Futures markets are now pricing in roughly a 47% probability of a 25 basis point rate hike at the Fed’s October meeting.