U.S. Treasury Yields Rise as Inflation Surges and Jobless Claims Climb Ahead of Fed Meeting

U.S. Treasury yields edged higher Friday morning as investors digested a mix of rising inflation and weaker-than-expected labor market data. The benchmark 10-year Treasury yield rose more than 5 basis points to 4.064%, rebounding from Thursday’s decline when it briefly touched the 4% mark following mixed economic signals.

Yields on other key Treasuries also climbed, with the 2-year note gaining over 3 basis points to 3.56% and the 30-year bond rising more than 4 basis points to 4.695%. Bond prices move inversely to yields, meaning investors saw modest declines in the value of existing Treasuries amid growing uncertainty over the economic outlook.

Thursday’s data revealed that the U.S. consumer price index (CPI) rose 2.9% year-over-year in August, marking the largest monthly increase since January. Core inflation, which excludes volatile food and energy prices and is closely monitored by the Federal Reserve, ticked up to 3.1%, well above the Fed’s 2% target.

Labor market signals, however, painted a more cautious picture. Weekly jobless claims jumped to their highest level since October 2021, signaling that employment conditions may be softening even as inflation remains persistent. This divergence between rising prices and slowing employment adds complexity to the Fed’s decision-making process.

Economists expect the Federal Reserve to announce a 25 basis point reduction in its federal funds target range to 4.00–4.25% during its upcoming September 16–17 meeting. “The latest economic numbers highlight tension between the Fed’s dual mandate of controlling inflation and supporting employment,” said Ryan Wang, U.S. economist at HSBC, noting that policymakers may reveal differing views on which economic factor should take priority.

source: cnbc