U.S. Treasury yields retreated Friday after August consumer price data came in line with expectations, offering a brief reprieve from a week-long global bond selloff that had pushed the 10-year yield within striking distance of 5%.
August's Consumer Price Index showed a 0.4% monthly gain and a 3.4% year-over-year increase, unchanged from the annual rate recorded in July. The 10-year Treasury yield fell 1 basis point to 4.93% after earlier touching 4.979%, its highest level since late 2023. U.S. stock indexes rose 1% or more following the release.
"The market is breathing a collective sigh of relief because consumer price index inflation today did not go above expectations or soar," Adam Sarhan, chief executive of 50 Park Investments, told Reuters. "The Fed is likely to stay data dependent and monitor the situation because higher energy prices and higher food prices act as an indirect tax on consumers and businesses."
The data did not eliminate concerns about a rate increase at the Fed's meeting next week. Market expectations still reflect a meaningful probability of a hike, even as some investors expect the central bank to hold and assess conditions.
Treasury Secretary Scott Bessent this week moved to shore up the long end of the bond market, directing his department to expand its repurchase program for longer-dated securities — with outlays of at least $4 billion — as 30-year yields have climbed to their loftiest point since 2007, according to Reuters. Even so, investors remained uneasy about the scale of U.S. fiscal deficits, the relentless volume of government and corporate debt coming to market, and the country's recently crossed $40 trillion debt threshold.