The PCE inflation reading, while not dramatic, is firm enough to keep inflation concerns alive and prevent a sustained decline in Treasury yields.
Early and rising — still a small slice of coverage but gaining +2pp over the last 3 days. This is where attention may be headed next.
PCE inflation readings, while not reaching dramatic levels, remain firm enough to keep inflation concerns alive and prevent Treasury yields from declining sustainably. Sources indicate that even moderate PCE prints remind markets that inflation has not fully disappeared, maintaining upside pressure on yields.
Sticky inflation data, even at moderate levels, prevents the market from pricing in aggressive rate-cut cycles and keeps the Fed's policy floor elevated. This creates a structural ceiling on how low yields can trade, as any sustained decline triggers renewed inflation vigilance and policy tightening expectations.
"A hotter-than-expected reading would raise the odds of a September rate hike, while a softer or in-line print would reinforce expectations that the Fed can remain patient."
"PCE wasn't dramatically strong, but it was firm enough to remind investors that inflation hasn't fully disappeared."