U.S. Treasury Yields Unchanged Amid Lower Inflation Data

2025-12-06 economy

Washington D.C., Friday, 5 December 2025.
On December 5, 2025, U.S. Treasury yields remained stable as the PCE inflation data for September was lower than expected, influencing potential Federal Reserve rate decisions.

Impact of Inflation Data on Federal Reserve Policy

The latest Personal Consumption Expenditures (PCE) inflation data for September showed a 0.3% increase month-over-month, which aligns with economists’ expectations and marks a 2.8% annual rise [1]. The data, released by the Commerce Department, is crucial as it serves as the Federal Reserve’s preferred measure of inflation [5]. The lower-than-expected inflation figures have contributed to stabilizing Treasury yields and have led to increased speculation about potential interest rate cuts by the Federal Reserve at their upcoming meeting on December 12, 2025 [2][4].

Market Reactions and Economic Indicators

The U.S. Treasury yields experienced minimal fluctuations following the release of the PCE data. The 10-year Treasury yield rose by just 1 basis point to 4.12%, while the 30-year yield increased similarly to 4.778% [2]. Meanwhile, the 2-year Treasury yield saw a slight rise of nearly 2 basis points, reaching 3.544% [2]. Despite these minor changes, the overall stability of yields reflects market confidence in the Federal Reserve’s potential rate cut decision. As of December 5, 2025, traders are pricing in an 87% probability of a 25-basis-point rate cut during the forthcoming Federal Reserve meeting [4][7].

Economic Context and Future Outlook

The broader economic context shows mixed signals. While initial jobless claims have fallen to 191,000, the lowest since September 2022, there has also been a reported decline in private payrolls by 32,000 jobs in November [8][6]. Furthermore, the recent economic data has maintained investor expectations for a Federal Reserve rate cut, as evidenced by modest gains in U.S. stock markets [3]. The Dow Jones Industrial Average, for instance, rose by 166.57 points on December 5, 2025 [3]. These market behaviors underscore the influence of inflation data on economic forecasting and policy decisions.

Anticipations for the Federal Reserve Meeting

The upcoming Federal Reserve meeting on December 12, 2025, is expected to be pivotal, with a significant focus on interest rate adjustments. The central bank is likely to lower rates by 25 basis points, potentially bringing the federal funds rate to a range of 3.5% to 3.75% [5][4]. This anticipated move is aimed at supporting a cooling labor market and addressing ongoing inflationary pressures that have persisted above the Fed’s 2% target since early 2021 [6]. However, the decision is not without contention, as policymakers remain divided on the best course of action given the mixed economic indicators and recent government data delays [9].

Sources

Treasury yields PCE inflation