Treasury yields climbed on Friday as both the Federal Reserve's favorite gauge of inflation and an employment cost index for September pretty much matched forecasts, signaling nothing to derail the central bank from imposing another three quarters percentage point rate hike on the economy at a policy meeting next week.
The moves came after traders absorbed stronger-than-expected gross domestic product growth of 2.6% in the U.S., reported Thursday, together with a prices paid component suggesting a faint sign of easing inflation pressure, and overnight news from Europe that German expansion was higher than forecast while Italian inflation shot higher.
The yield Friday on the 10-year Treasury stood at about 4.006%, up about 7 basis points, one day after the yield fell as much as 11 basis points on Thursday.
The 2-year Treasury yield was last up by 10 basis points to 4.424%. It had fallen by around 12 basis points on Thursday.
Yields and prices move in opposite directions and one basis point is equivalent to 0.01%.
Fed policymakers' favored inflation measure is the personal consumption expenditures price index, and that showed inflation stayed strong in September but mostly within expectations, the Bureau of Economic Analysis reported Friday.
The core rate, stripping out food and energy, expanded by 0.5% from August, and by 5.1% over the past 12 months. The monthly gain was in line with Dow Jones estimates, while the annual increase was slightly below the 5.2% forecast.
Another data point on Friday showed that employment costs rose 1.2% in the third quarter, in line with estimates, according to the Bureau of Labor Statistics. On an annual basis, the employment cost index increased 5%, slightly lower than the 5.1% pace in the second quarter.
Separately on Friday, the BEA reported that personal income increased 0.4% in September, one-tenth of a percentage point above the estimate. Spending as gauged through personal consumption expenditures increased 0.6%, more than the 0.4% estimate.
However, when adjusted for inflation, spending rose just 0.3%. Disposable personal income, or what is left after taxes and other charges, rose 0.4% on the month but was flat on an inflation-adjusted basis.
Bringing down inflation has been the Federal Reserve's top priority in 2022, spurring the central bank to hike interest rates since March. While another 75 basis-point rate hike is widely expected next week from the central bank, uncertainty has grown about how much it might raise rates in December, and how it will act over the course of the coming winter.
-- With reporting by Jeff Cox