US Treasuries: Investors Process Inflation Data

U.S. Treasury yields rose Friday as investors processed higher-than-expected wholesale inflation data and pondered what that might mean for Federal Reserve policy changes.

At 5:32 a.m. ET, the yield on the 10-year Treasury was up more than 5 points to 3.902%. The yield on 2-year government bonds was 4.69% after an increase of more than 7 basis points.

Yields and prices have an inverse relationship and one basis point equals 0.01%.

Treasure Chests

US1M 1 month US Treasury 4.609% +0.003 0.00%
US3M US Treasury at 3 months 4.848% +0.047 0.00%
US6M US Treasury at 6 months 5.016% +0.013 0.00%
US1J US Treasury at 1 year 5.005% +0.036 0.00%
US2Y US Treasury at 2 years 4.688% +0.069 0.00%
US10Y US Treasury at 10 years 3.894% +0.051 0.00%
US30Y US Treasury of 30 years 3.944% +0.04 0.00%

The producer price index for January came in higher than expected on Thursday, causing investors to worry about inflation developments and upcoming monetary policy decisions from the Fed.

Wholesale prices rose 0.7% month on month in January, after falling 0.5% in December. Economists polled earlier by Dow Jones had expected January’s PPI to rise 0.4%.

Data released earlier this week showed that consumer inflation rose 0.5% in January, which was also a larger increase than expected.

Several Fed speakers hinted at further rate hikes after the data was released on Thursday. The central bank uses rate hikes as a tool to cool the economy and reduce inflation. Many investors are hoping that the central bank will halt rate hikes this year, fearing that high interest rates will shrink the US economy.

On Friday, investors will be looking at comments from Richmond Fed President Tom Barkin and Fed Governor Michelle Bowman for further guidance on likely policy moves. No important economic data is expected.


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