Treasuries Gain as Inflation Gauge Cools Fed Rate-Hike Bets

Treasuries rose as the Federal Reserve’s preferred inflation gauge increased less than forecast, cooling expectations for additional rate hikes. After Thursday’s data, yields fell sharply: two-year notes dropped more than four basis points to 4.10%, while 10-year yields declined two basis points to 4.37%. The 30-year yield touched 4.82%, the lowest since March. Interest-rate swaps implied about 33 basis points of tightening by the December policy meeting, down from roughly 36 basis points the prior close, and the probability of a rate increase next month fell to about one-in-three. The PCE index rose 0.4% in May versus a 0.5% median estimate, with core PCE up 0.3%. Investors also weighed revised first-quarter GDP and jobless claims alongside oil-price movements tied to the U.S. war on Iran.