Treasury yields fall sharply to start October

U.S. Treasury yields fell early on Friday, ahead of the release of key inflation data later in the morning.

The yield on the benchmark 10-year Treasury note fell 6 basis points to 1.467% in afternoon trading. The yield on the 30-year Treasury bond slid more than 5 basis points lower to 2.035%. Yields move inversely to prices and 1 basis point is equal to 0.01%.


The 10-year rate topped 1.56% earlier in the week, its highest point since June, amid investor concerns about persisting inflation and tighter monetary policy. The yield has mostly bounced around below that level in the days since, but many Wall Street pros expect yields to rise in the months ahead.

"We think the market is too sanguine on inflation, given big demand-pull factors (money supply/monetary conditions) and extreme cost-push factors (de-globalisation, rising house prices, rising commodity prices, deteriorating demographics, rising minimum wages, the rising cost of decarbonisation)," Credit Suisse strategist Andrew Garthwaite said in a note to clients. "We continue to see 10-year breakeven inflation rising to 2.5% by year-end and 3% by end-2022. This pushes up bond yields to 1.8% on a 6-month view."

Geoffrey Yu, senior market strategist at BNY Mellon, told CNBC's "Squawk Box Europe" on Friday that the U.S. may be in a "slightly better position" than other countries when it comes to rising prices. He explained that both the producer price index and CPI were running high in the U.S., which meant companies could pass on some of that pricing pressure to the underlying consumer.

By comparison, China's PPI was "very problematic" but CPI was "running at barely 1%," said Yu, which puts more pressure on company margins and earnings.

The Bureau of Economic Analysis said Friday that personal income rose 0.2% in August, in line with expectations. The core personal consumption expenditures price index rose 3.6% year over year. Economists surveyed by Dow Jones were expecting 3.5%.

Meanwhile, Congress appeared prevent a government shutdown Thursday. The Senate and House both passed a short-term appropriations bill that would keep the government running through Dec. 3 and sent it to President Joe Biden to sign. Congress is still working on extending the debt-ceiling and Biden's infrastructure plan.

There are no auctions slated to be held on Friday.

CNBC's Yun Li contributed to this market report.