Treasury yields fell on Friday as investors analyzed the prior day’s economic data and looked forward to another inflation reading. The yield on the 10-year Treasury note dropped by 2 basis points to 4.1085% at 3:37 a.m. ET, and the yield on the 2-year Treasury note decreased by 1 basis point to 4.3036%. Yields move opposite to prices, and a basis point is equal to 0.01%. This followed the fourth quarter gross domestic product data for the U.S. which surpassed expectations, showing the economy’s annualized growth at 3.3%, higher than the anticipated 2% by economists. At the same time, inflation continued to slow down, with the core personal consumption expenditures price index increasing by 2.7% annually, down from 5.9% a year ago.
Investors are keeping a close eye on the economic data for indications of when the Federal Reserve may begin to reduce interest rates. “Although GDP growth was higher than anticipated in the fourth quarter, the underlying inflation continued to decline, with annualized core PCE inflation hitting the 2% target in the fourth quarter,” noted Paul Ashworth, Capital Economics’ chief economist for North America. “In summary, an early reduction in rates by the Fed is still the most probable scenario.” Scheduled data for Friday includes December’s personal consumption expenditures price index, a key inflation gauge for the Federal Reserve. Economists polled by Dow Jones anticipate a 3% increase in core PCE prices for December on a year-over-year basis.
