US Treasuries finished Friday's session with mixed results, as the yield curve flattened noticeably. The August CPI report reinforced expectations for a Federal Reserve rate hike next week, which weighed on shorter-dated notes, while long-end yields held steady. Meanwhile, breakeven inflation rates on Treasury Inflation-Protected Securities dropped significantly amid anticipations that the Fed will move to restore price stability.

Just after 3 p.m. in New York, the 2-year Treasury yield rose approximately 4 basis points on the day, while the 30-year yield fell about 1 basis point; both the 2-year/10-year and 5-year/30-year curves flattened by roughly 3 basis points each. The US 10-year yield closed the week near 4.97%, sitting close to the upper end of its four-day trading range, with the week's low of 4.76% touched on Tuesday.

Friday's price action was driven by the August CPI data, which showed core prices rising 0.3% month-over-month, exceeding the 0.2% gain economists had projected. As overnight index swaps tied to the Fed's meeting date priced in roughly 22 basis points of tightening for the September 16 decision—up from 18 basis points prior to the release—the 2-year yield briefly climbed as much as 7 basis points, pushing the curve steeper in that segment before flattening overall.

Further out on the curve, longer-dated overnight index swaps incorporated expectations for a cumulative tightening of about 50 basis points by year-end, equivalent to two quarter-point hikes. At 4 p.m. in New York, the 2-year yield was up 4 basis points at 4.6254%, while the 5-year yield gained 2.6 basis points to 4.7876%. The 10-year yield rose 1 basis point to 4.9731%, and the 30-year yield slipped 1.1 basis points to 5.3543%. The spread between the 5- and 30-year yields narrowed by about 3.7 basis points to 56.50 basis points, while the 2-year/10-year spread tightened roughly 3.2 basis points to 34.34 basis points.