Longer-end U.S. Treasury yields were slightly higher Wednesday, after slipping from early session highs when the U.S. consumer price index report showed inflation moderating last month, but yields remain around their highest levels since mid-July.
What yields are doing
The 10-year Treasury note yield
was at 1.358%, compared with 1.342% at 3 p.m. Eastern Time on Tuesday. Yields for debt rise as prices fall.
The 30-year Treasury bond yields
2.014%, versus 1.984% a day ago.
The 2-year Treasury note
was yielding 0.225%, compared with 0.236% on Tuesday.
On Tuesday, the 10-year and 30-year Treasury yields hit their highest yields since July 14, while the 2-year touched its highest since July 13, based on 3 p.m. levels, according to Dow Jones Market Data.
What’s driving the market?
The rate of inflation for the 12 months ended in July remained at 5.4% for the second straight month, a 20-year high, the Labor Department said Tuesday.
Meanwhile, the consumer price index climbed 0.5% on a month-over-month basis last month, but down from 0.9% in June and it matched the expectations of economists surveyed by The Wall Street Journal.
The closely watched measure of inflation that omits volatile food and energy — the so-called core price index — rose 0.3%, below expectations for a 0.4% gain, and the 12-month rate decelerated to 4.3% from 4.5%, which was a 29-year high.
Meanwhile, Kansas City Federal Reserve President Esther George said Wednesday the time has come to end the central bank’s bond-buying program, but Chicago Fed President Charles Evans said late Tuesday that he was not yet ready to support announcing a tapering of bond purchases in September, as some of his colleagues have argued for in recent days.
Wednesday’s bond-market moves come after yields also rose yesterday, when the U.S. Senate voted 69-30 to approve the bipartisan infrastructure bill — a move that sends the $1 trillion measure over to the House of Representatives for its approval.
Still ahead for Wednesday is an auction of $41 billion in 10-year Treasury notes at 1 p.m., which will be notable coming after the readings of inflation.
What analysts are saying
“The more moderate inflation print may allow investors to feel comfortable buying the recent dip in Treasuries, particularly in the 5y part of the curve as there is little rush for the Fed to hike rates quickly,” TD Securities strategists Jim O’Sullivan, Oscar Munoz, and others wrote in a note. “We expect 5y TIPS BEs to remain elevated despite the weaker print as the carry profile for August and September remains extremely positive.”
“The July increases in the headline Consumer Price Index and the core CPI were comparatively tame considering what we’ve seen the past few months as the low bar of year-ago comparisons drops out,” Greg McBride, chief financial analyst at Bankrate.com, wrote in a note. “Even though the Federal Reserve’s preferred inflation metric is not the Consumer Price Index, don’t expect today’s numbers to quiet the calls for the Fed to dial back crisis-era actions for fear of stoking further price increases. The ‘transitory or sustained’ debate will nonetheless continue.”