BOND REPORT: 10-year Treasury Yield Drops To Four-week Low

Treasury prices rose Thursday after a round of economic data, sending benchmark yields to a four-week low. The 10-year note (10_YEAR) yield, which falls as prices rise, was down 3.5 basis points at 2.523%, its lowest since May 30. The yield lingered near its lowest closing level in 11 months — 2.438% — which it touched on May 28.

The drop in yields came amid mixed economic data. Investors have been keeping a close eye on inflation after data last week showed a pickup in cost pressures. As the Federal Reserve’s measures of employment and inflation close in on stated targets, market participants are looking for signs of when and how the central bank could begin hiking rates.

The personal consumption expenditure price index, rose to its highest annual rate since October 2013, data showed. The index climbed 1.8% over the past 12 months, according to May data, up from 1.6% in April. Core PCE, the Fed’s preferred measure of inflation, is up 1.5%, the highest since February 2013. Core PCE excludes food and energy.

Consumer spending rose 0.2% last month, while personal incomes rose 0.4%. Economists polled by MarketWatch had expected both to rise by 0.4%.

The weekly number of people applying for unemployment benefits slipped by 2,000 to 312,000. Economists has expected 310,000.

The 30-year bond (30_YEAR) yield fell 4 basis points to 3.343% and the 5-year note (5_YEAR) yield dropped 4 basis points to 1.645%.

Treasurys added to gains after St. Louis Fed President James Bullard said on Fox Business Network that he believes the markets are not recognizing how close the Fed is to achieving its goals. He suggested the first rate hike could come at the end of the first quarter of 2015.

By Ben Eisen