US Treasuries Rally on Slowing Consumer Spending and In-Line PPI

(New York=Yonhap Infomax) Jeong Ho Jin = US Treasury prices advanced across the curve.

The rally was driven by signs of slowing US consumer spending and wholesale inflation data that matched expectations, fueling hopes for a Federal Reserve rate cut.

According to Yonhap Infomax’s overseas rates intraday screen (screen no. 6532), as of 08:57 AM US Eastern Time on the 25th, the yield on the 10-year Treasury note stood at 4.012%, down 2.50 basis points from the previous session’s 3:00 PM close.

The yield on the policy-sensitive 2-year note fell 2.40 basis points to 3.481% over the same period.

The 30-year Treasury yield declined 2.60 basis points to 4.651%.

The spread between the 10-year and 2-year yields was little changed at 53.1 basis points, compared to 53.2 basis points the previous day.

Treasury yields move inversely to prices.

The US Producer Price Index (PPI) for September rose 0.3% month-on-month on a seasonally adjusted basis, in line with market expectations of a 0.3% increase.

Core PPI, which excludes volatile food and energy prices, rose 0.1% from the previous month, below the consensus forecast of a 0.2% gain.

US retail sales, a key gauge of consumer spending, increased 0.2% month-on-month in September on a seasonally adjusted basis, missing the market estimate of a 0.4% rise.

Compared to August’s 0.6% monthly increase, the slowdown in September was more pronounced.

Wall Street expects US consumers to tighten spending during the upcoming Black Friday shopping season, which begins after Thanksgiving. The latest retail sales figures support this outlook.

With inflation data in line with expectations and consumer spending coming in below forecasts, Treasury yields fell across the board. The market increasingly believes the Federal Reserve has more room to cut rates.

According to the CME FedWatch Tool, the federal funds futures market is pricing in an 84.7% probability of a 25 basis point rate cut in December, virtually unchanged from the previous session’s close.

Private employment data continued to signal labor market weakness.

According to ADP, a private employment information provider, preliminary estimates show that US private payrolls declined by an average of 13,500 per week over the four weeks ending November 8.

jhjin@yna.co.kr

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