Context:

U.S. Treasury yields declined as traders digested a batch of economic data and the Federal Reserve’s latest policy stance. Investors weighed a stronger-than-target PCE inflation reading against the central bank’s decision to keep rates unchanged in a 3.75%–4% range, with officials signaling flexibility ahead. Shorter-term yields fell more than longer ones as markets paused for upcoming labor market indicators, including the employment cost index and jobs data. The week’s lookahead centers on fresh employment data to gauge the strength of demand and potential policy paths.

Dive Deeper:

• The benchmark 10-year yield slipped to 4.933%, while the 30-year fell to 5.293% and the 2-year dropped to 4.589%, reflecting a broad move lower across maturities as investors reassess rate prospects.

• Thursday’s release of the personal consumption expenditures price index showed a 0.5% monthly increase and a 3.6% year-over-year rise, topping the Fed’s 2% target and contributing to cautious sentiment about longer-term policy settings.

• The Fed had held the key rate steady in a 3.75% to 4% range in a widely expected decision, with Chair Warsh indicating policymakers were not pursuing a fixed course, signaling data dependence.

• Market attention is shifting to the employment cost index for the third quarter, which will illuminate wage dynamics and labor costs as part of the broader inflation outlook.

• Upcoming data include the October non-farm payrolls report and the September JOLTS job openings, which are expected to influence near-term expectations for further policy moves and financial conditions.