US Treasury Yields Hold Steady as July PCE Data Sets the Stage for Jackson Hole

The U.S. Treasury market is poised for a quiet session as investors await the July Personal Consumption Expenditures (PCE) Price Index, scheduled for release at 12:30 GMT on Wednesday. The PCE, the Federal Reserve’s preferred gauge of inflation, will be accompanied by the first estimates of Q2 GDP and Durable Goods Orders—data that could temper the dollar’s recent volatility.

Market expectations point to a continued rise in price pressures, with the core PCE—excluding the volatile food and energy components—forecast to climb to 0.2 % month‑over‑month from 0.1 % in June, maintaining a 3.3 % year‑on‑year pace that remains above the Fed’s 2 % target. While this marks a slight easing from the 3.4 % peak seen in May, it still signals persistent inflationary momentum.

Analysts suggest the reaction to the figures may be muted, as the spotlight remains on the upcoming Jackson Hole symposium. Fed Chair Kevin Warsh is expected to address the market’s appetite for forward guidance, a topic that has fueled recent volatility. DBS Bank strategists argue that Warsh will need to clarify how the Fed plans to anchor expectations without explicit guidance, how much tightening it is willing to tolerate through long‑term yields, and the policy boundary between the Fed and Treasury.

Interest‑rate expectations have softened, with CME FedWatch pricing only a 38 % probability of a 25‑basis‑point hike in September—down from 55 % a month earlier. The lack of clear direction has raised doubts about the Fed’s resolve to curb inflation.

Meanwhile, the U.S. dollar has struggled to regain footing, falling 0.75 % on the month and more than 2.5 % below its late‑July peak. The combination of weak employment data, dovish policy expectations, and Treasury plans to increase long‑dated securities repurchases has left the greenback on shaky ground. Even a robust PCE reading may not be enough to lift the dollar this week.

In short, Treasury yields remain largely unchanged as markets digest the impending inflation data and await the Fed’s signal at Jackson Hole.