Treasury Yields Slip on September 30 as Markets Brace for PCE Data and October Fed Hike Decision

U.S. Treasury yields pulled back on September 30, offering a brief reprieve to investors after the 30-year bond yield hit its highest level since 2002 the prior session, reaching just above 5.6%. Stock futures pointed to a more positive open, though the broader mood remained cautious heading into a busy slate of economic releases.

Markets were focused on three key data points due that day: the August PCE inflation reading, the ADP private payrolls report for September, and a final revision to second-quarter GDP. The August ADP report, released a month earlier, had come in at 38,000 private-sector jobs, well below the consensus estimate of 47,000 and the weakest monthly gain since January. Whether the September PCE figure would confirm persistent inflation or signal a cooling was seen as the pivotal input for whether the Fed moves again in October. The Fed raised rates at its September 16 meeting, pushing the 10-year yield back above 5%, with Chairman Kevin Warsh citing ongoing inflation risks.

Japan's benchmark government bond yields were on course for a fifth consecutive quarter of double-digit increases as of September 30, underscoring the breadth of the global bond selloff and mounting concerns about fiscal sustainability. In currency markets, the U.S. dollar index retreated after weak job openings data, though hawkish Fed commentary helped limit the decline. German retail sales for August came in at plus 1.3% month-over-month, below the 1.5% estimate but a sharp reversal from the minus 3.4% reading in July. German September CPI was also due later in the session.

In India, bank stocks recorded sharp losses as markets priced in steep rate hikes by the Reserve Bank of India, though analysts described the selloff as potentially overdone and an opportunity to accumulate quality names in the sector. Rate-sensitive instruments such as the State Street SPDR ICE Preferred Securities ETF, which carries ultra-long duration exposure dominated by fixed-rate perpetual preferred securities, remained under pressure given the persistence of elevated yields.