US Treasury yields rise as global inflation fears mount

• US Treasury yields climb as global inflation data sparks fears; 10-year bond yield rises to 4.320%.
• Canadian and Australian inflation data higher than expected, contributing to global yield increases.
• Focus shifts to US May PCE report, with expectations of a slight decrease in both headline and core inflation.

US Treasury yields climbed on Wednesday after some countries revealed inflation data, which was higher than expected and increased fears that the upcoming May’s Personal Consumption Expenditure (PCE) Price Index report in the United States could come hot.

Elevated US yields weighed on Gold, pushing prices to a two-week low

On Tuesday, data from Canada showed that inflation came hotter than expected, spurring a jump in global bond yields. On Wednesday, Australia’s Consumer Price Index (CPI) rose to its highest level in six months, peaking at 4%, well above the Reserve Bank of Australia (RBA) inflation goal.

Focus this week will be on the Fed’s preferred gauge for inflation, the May PCE, which is expected to decrease from 2.7% to 2.6 YoY, while core PCE is anticipated to be 2.6% in the twelve months to May, down from 2.8%.

Other significant data releases include the final reading of Q1 2024 Gross Domestic Product (GDP), Durable Goods Orders, and Initial Jobless Claims.

The US 10-year Treasury bond yield has risen seven basis points to 4.320%, its highest level since mid-June. This pushed Gold prices toward a two-week low of $2,293 before stabilizing at around $2,297.

Data from the Chicago Board of Trade (CBOT) shows that traders expect 36 basis points (bps) of easing, according to December’s 2024 fed funds rate futures contract. In the meantime, the CME FedWatch Tool shows odds for a 25-basis-point Fed rate cut in September at 56.3%, lower than Tuesday’s 59.5%.