U.S. Treasury yields edged lower on Friday as investors reacted to stronger-than-anticipated inflation data and comments from Federal Reserve Chairman Kevin Warsh. The 10-year Treasury yield dropped 1 basis point to 5.074%, while the 30-year yield remained nearly unchanged at 5.422%. The 2-year yield also fell 1 basis point to 4.731%.
The decline came after a week of robust inflation reports. On Thursday, the producer price index showed wholesale prices surged 6.3% annually in September, the largest increase since 2022, according to the Bureau of Labor Statistics. Economists had forecast a 5.5% rise. This followed Wednesday's consumer price index report, which indicated a 0.6% monthly increase and a 3.7% annual rise in September, exceeding estimates of 0.6% and 3.6%, respectively.
The inflation surge has been primarily driven by rising energy prices amid the ongoing U.S.-Iran conflict. The data arrives two weeks before the Fed's next interest rate decision. Chairman Warsh, speaking on Thursday, declined to hint at any potential rate hikes this month. 'I don't prejudge meetings. I don't believe in saying now what I might do at the meetings that we have in the balance of this year,' he stated.
Traders are now assigning an 87% probability to the Fed maintaining current rates, as indicated by the CME FedWatch Tool.