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Treasury yields end mostly higher after subdued U.S. inflation reading in holiday-shortened session

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Yields on U.S. Treasurys finished mixed during Friday’s preholiday shortened session after data showed inflation continuing to slow in November and moving toward the Federal Reserve’s target.

What yields did

The yield on the 2-year Treasury note
BX:TMUBMUSD02Y
fell 1.1 basis points to 4.338% at 2 p.m. Eastern, its lowest closing yield since May 23, according to Dow Jones Market Data. Yields and debt prices move opposite each other.

The 10-year Treasury note
BX:TMUBMUSD10Y
rose 1.4 basis points to 3.907%.

The 30-year Treasury bond yield
BX:TMUBMUSD30Y
ended 2.5 basis points higher at 4.059%.

What happened

Treasury yields initially ticked higher after the government said the personal-consumption expenditures, or PCE, index dipped 0.1% last month. Year-over-year inflation slowed to 2.6% from 2.9% in October, the lowest since February 2021.

The more closely followed core PCE rate that excludes food and energy rose 0.1% in November, matching the forecasts of economists polled by The Wall Street Journal. The increase in the core rate over the past 12 months decelerated to 3.2% from 3.4% in the prior month. That’s also the smallest increase since early 2021.

Live blog: PCE report for November

Yields subsequently pulled back but then drifted back to the upside over the course of the session.

In other data, consumer sentiment ended the year on a high note, based on an index from the University of Michigan. Orders for durable goods rebounded 5.4% in November, the government said Friday, the largest gain since July 2020. And new home sales plunged last month.

U.S. bond traders had a shortened session on Friday after Sifma called for a 2 p.m. Eastern time close. Meanwhile, U.S. equity markets continued with a full day of trading. Financial markets are closed Monday for Christmas Day.

What analysts say

“It was a softer inflation print to be sure, although we’ll argue the market was biased for a downside surprise which has translated to a somewhat counterintuitive price response,” said Benjamin Jeffery, rates strategist at BMO Capital Markets, in a note.

Here’s how 10 of Wall Street’s predictions for 2023 panned out

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