U.S. Treasury yields experienced a slight decline on a day with reduced trading activity. The 10-year Treasury yield dropped by 2 basis points to 4.22%, while the 2-year Treasury yield remained unchanged at 4.208%. In the broader market, the 1-month Treasury yield stood at 4.64%, and the 30-year Treasury yield decreased to 4.384%.

Economic indicators released earlier in the week showed that the Federal Reserve's preferred inflation measure aligned with Dow Jones forecasts at 2.3%. Additionally, there was a larger-than-expected drop in initial claims for unemployment benefits, indicating a tightening labor market. The minutes from the Fed's November meeting suggested that gradual interest rate cuts may be possible if inflation and labor data continue to meet expectations. However, concerns have been raised among economists due to President-elect Donald Trump's recent threats of imposing tariff hikes on China, Mexico, and Canada. These threats have raised concerns about potential domestic inflation, which could lead the Fed to adopt a more cautious approach to policy easing.

Currently, the market is pricing in a 66.3% probability of a 25 basis-point rate cut in December, according to CME Group’s FedWatch Tool, compared to a 33.7% chance of maintaining the current rate.