Yields ease and dollar softens after cooler August PCE
Treasury yields eased after investors digested a softer August inflation reading. Core personal-consumption prices at 3.0 percent year over year cut near-term odds of an October Federal Reserve hike.
The dollar and Treasury yields transmitted Wednesday’s softer PCE shock as expected: after BEA printed August headline PCE up 0.3% and 3.4% year over year, with core up 0.2% and 3.0%, CNBC said stock futures gained and Treasury yields moved lower as traders cut October hike odds.
That is the classic soft-print path for duration — lower front-end yields, less support for the dollar — though strategists immediately noted August data do not capture September’s diesel and oil spike. Mortgage rates and investment-grade spreads will follow the same yield complex into Friday’s employment report and the October FOMC window.
BEA’s annual-update methodology changes helped explain why annual rates landed below many pre-release forecasts without proving inflation has returned to the Fed’s 2% goal. Core and headline remain well above target even after the cooler print.
Rates desks and wires agree the soft annual core PCE eased near-term hike pricing through the dollar and yield channel.
How long that relief lasts depends on whether September energy pass-through reverses the cool-down narrative before the next FOMC.
Where outlets agree Rates desks and wires agree the soft annual core PCE eased near-term hike pricing through the dollar and yield channel.
Where they differ How long that relief lasts depends on whether September energy pass-through reverses the cool-down narrative before the next FOMC.