After declining over the past two sessions, treasuries rebounded on Friday.
While bond prices initially retreated after an early climb, they managed to solidify their gains later in the afternoon. Consequently, the yield on the ten-year benchmark note, which inversely tracks its price, decreased by 4.2 basis points, settling at 3.749 percent.
The resurgence in treasuries followed the release of key data on U.S. consumer price inflation for August.
According to the Commerce Department, the personal consumption expenditures (PCE) price index edged up by 0.1 percent in August, following a 0.2 percent rise in July, meeting expectations.
The report further noted that the annual growth rate of the PCE price index decelerated to 2.2 percent in August, down from 2.5 percent in July. Economists had predicted a slowdown to 2.3 percent.
This slightly more significant-than-expected slowdown in annual price growth has fostered optimism that the Federal Reserve may continue its aggressive interest rate cuts in the coming months.
When excluding food and energy prices, the core PCE price index also modestly increased by 0.1 percent in August after a 0.2 percent rise in July, mirroring expectations of another 0.2 percent increase.
The Commerce Department also reported that the annual growth rate of the core PCE price index increased to 2.7 percent in August from 2.6 percent in July, aligning with forecasts.
Commenting on the August PCE report, Quincy Krosby, Chief Global Strategist for LPL Financial, stated, "The August PCE report supports the Fed's decision to take significant action on September 18, although the core year-over-year rate at 2.7% indicates that another 50 basis point rate cut must be carefully considered unless labor market data shows weakness."
She added, "While the Fed cannot yet claim total victory over inflation, today’s report - showing a 2.2% year-over-year headline - underscores that overall inflation continues to move decisively in the right direction."
The Labor Department's monthly employment report is expected to take center stage next week, alongside reports on manufacturing and service sector activity, which may also draw significant attention.
