Treasuries experienced early session lethargy on Friday, but as the trading day progressed, they came under notable pressure.In the afternoon, bond prices decisively dipped into negative territory after a morning session near the baseline. Consequently, the yield on the benchmark ten-year note, which inversely relates to its price, ascended by 4.4 basis points, closing at 3.911 percent.This increase marks the ten-year yield’s fifth consecutive rise, culminating in its highest closing level in two weeks.The sustained softness in treasuries followed the Commerce Department’s release of U.S. consumer price inflation data, a metric favored by the Federal Reserve.The report from the Commerce Department indicated that consumer prices rose consistent with economists’ forecasts for July, while the annual rate of price growth remained unexpectedly flat.Specifically, the personal consumption expenditures (PCE) price index climbed by 0.2 percent in July, following a 0.1 percent rise in June, in line with expectations. The core PCE price index, excluding food and energy prices, similarly edged up by 0.2 percent in July, mirroring June’s increase and economist forecasts.Additionally, the annual growth rates for the PCE and core PCE price indices were unchanged at 2.5 percent and 2.6 percent, respectively. Analysts had anticipated a slight rise of 0.1 percentage point in these year-over-year growth rates.This data bolstered expectations of an impending interest rate cut by the Federal Reserve next month. However, some analysts, such as Jamie Cox from Harris Financial Group, argue against a substantial 50 basis point reduction.Traders may have already factored in a 25 basis point rate cut for September, precipitating the protracted decline in treasuries.According to CME Group’s FedWatch Tool, there is a 69.5 percent probability of a quarter-point rate cut next month and a 30.5 percent likelihood of a half-point rate cut.Nonetheless, ING Chief International Economist James Knightley noted that “a soft jobs report [next week] could still shift the odds in favor of a 50bp rate cut.”Following the Labor Day holiday on Monday, the focus will likely shift to the monthly jobs report. Reports on manufacturing and service sector activity will also garner attention, alongside the Fed’s Beige Book.The material has been provided by InstaForex Company – www.instaforex.com
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