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US Treasury yields fall amid inflation rate news release

US Treasury yields fall amid inflation rate news release

Yields on U.S. Treasury securities fell on Thursday following the release of data that showed the key inflation index for January matched forecasts, bolstering market expectations that the Federal Reserve will begin cutting interest rates in June.

According to data from the U.S. Department of Commerce, the Personal Consumption Expenditures (PCE) price index for January rose by 0.3% compared to the previous month. The figures for December were revised down: the PCE index increased by 0.1%, not 0.2% as previously reported.

Year-over-year, the PCE rose by 2.4% in January, marking the lowest rate since February 2021. The yield on two-year U.S. Treasury notes, which reflects expectations related to the interest rates of the American central bank, dropped by 2.5 basis points to 4.623%, while the yield on 10-year Treasury bonds fell by 4.3 basis points to 4.231%. Bond and stock quotes declined this week as a result of market position adjustments based on assumptions that PCE indexes exceeding forecasts would force the Federal Reserve to delay the start of interest rate cuts.

The probability of a Fed rate cut in June, as implied by futures pricing, increased to 66.2% from 57.0% prior to the release of the PCE indexes.

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