Treasury yields ease after Federal Reserve rate hold - CNBC

The 10-year U.S. Treasury yield hovered above 5% Thursday morning following the latest inflation data and a strong reading on economic growth.

Third-quarter gross domestic product increased at an annual rate of 3.4%, better than the 3.1% expected by economists, while inflation accelerated in September. The personal consumption expenditures price index — closely watched by Federal Reserve policymakers — increased a seasonally adjusted 0.5% compared with August, in line with the Dow Jones consensus estimate. It rose 3.6% year-over-year, slightly less than the 3.7% expected but still higher than August's reading and above the Fed's 2% target.

The yield on the 10-year Treasury — used as a benchmark for borrowing costs ranging from mortgages to credit cards — was 3 basis points lower at 5.011%.

The 2-year Treasury yield, which more closely tracks short-term Federal Reserve policy, lost 3 basis points to trade at 4.693%, while the yield on the 30-year Treasury was down by 2 basis points at 5.334%.

One basis point equals 0.01%, or 1/100th of 1%, and yields and prices move inversely to one another.

The data comes one day after the Federal Reserve's October meeting that saw the central bank hold its key interest rate in a range between 3.75% and 4%. But the post-meeting statement acknowledged that inflation remains elevated.

"The accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the Committee's 2 percent goal," the Fed said Wednesday.

Speaking to reporters after the meeting, Fed Chair Kevin Warsh said policymakers were not on a set path.

"If we had a firm conclusion about the conduct of monetary policy, we'd announce it to much fanfare today," he said.

Markets are currently pricing in an 83% chance of a quarter-point hike from the Fed in December, according to the CME's FedWatch tool.

Ali Hassan, a portfolio manager at Thornburg Investment Management, said in a note on Wednesday that markets appeared to see the Fed updates as "a softer policy path, not an inflation scare."

"The market trimmed hikes further out: it still expects a December move but is less convinced of the follow-through," Hassan said. "The test comes on Friday, when the blackout lifts [on Fed policymakers' additional commentary]. If Fed speakers put more hikes back on the table, they could claw back the front-end easing and blunt the self-defeating dynamic."