Dollar Softens, T-Yields Retreat Despite Solid U.S. Growth

U.S. Treasury yields edged lower on Wednesday as investors increased allocations to government bonds, even after economic data confirmed strong growth momentum. The 10-year yield, the key benchmark for borrowing costs, fell by more than three basis points to around 4.14%. Shorter- and longer-dated yields followed the same direction, with the 2-year near 3.52% and the 30-year slipping below 4.80%.

Caution Takes Priority Over Growth Data

The move reflected a cautious market tone rather than a reassessment of economic strength. As year-end approaches, investors appear more focused on risk management and liquidity than on chasing returns, limiting the impact of upbeat data on yields and the dollar.

Strong Expansion, Persistent Price Pressures

Economic figures showed the U.S. economy expanded at a faster pace in the third quarter, comfortably beating expectations and accelerating from the previous quarter. However, inflation indicators tied to growth remained elevated, reinforcing the view that price pressures are easing only gradually and remain a key concern for policymakers.

Consumer Sentiment Loses Momentum

Data on consumer confidence pointed to a softer outlook. Sentiment weakened more than forecast in December, raising concerns that household spending could cool in the months ahead, particularly as financial conditions remain restrictive.

Labor Market Shows Early Signs of Strain

Labor market data delivered mixed signals. New claims for unemployment benefits declined, indicating continued strength in near-term hiring conditions. At the same time, the number of people receiving ongoing benefits increased, suggesting that job seekers are taking longer to find new employment.

Dollar Slips as Yield Support Fades

In currency markets, the U.S. dollar weakened as Treasury yields fell, briefly touching its lowest level in more than two months before stabilizing. The move underscored how falling yields offset the usual support the dollar draws from strong growth data.

Policy Outlook Remains Uncertain

Heading into the final days of the year, investors remain wary. The combination of solid economic growth, lingering inflation pressures, and tentative signs of labor market cooling has clouded expectations for interest rate policy in 2026, keeping markets in a cautious holding pattern.