Treasury yields extend pullback from 8-month highs after inflation data

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U.S. Treasury yields fell early Wednesday after a key economic data release showed inflationary pressures still remained contained during the pandemic.

What are Treasurys doing?

The 10-year Treasury note yield
TMUBMUSD10Y,
1.124%

fell 0.5 basis point to 1.133%, extending its pullback after touching its highest level since March on Monday, while the 2-year note rate
TMUBMUSD02Y,
0.148%

was up 0.4 basis point to 0.151%. The 30-year bond yield
TMUBMUSD30Y,
1.860%

slid 1.7 basis points to 1.868%. Bond prices move inversely to yields.

What’s driving Treasurys?

In U.S. economic data, the consumer-price index on March for December came in at an increase of 0.4%, in line with analysts’ estimates. Stripping out for food and energy prices, the core inflation gauge rose by 0.1%.

The data release offers a snapshot of inflationary pressures after bond traders turned bearish on long-dated Treasurys this month amid fears a more aggressive fiscal agenda under Biden could lift growth, and potentially push the Federal Reserve to ease off the pedal earlier than anticipated.

That’s why investors will also eye speeches from senior Fed officials to glean clues on when the central bank may taper its asset purchases. Fed Gov. Lael Brainard and Fed Vice Chairman Richard Clarida will both speak later today.

Some supply will also enter the market, with an auction of $24 billion of 30-year bonds due in the afternoon.

What did market participants say?

“The overnight bout of stabilization in the Treasury market in which 10-year yields dipped as low as 1.105% reinforces the observation that the initial bear wave appears to have run its course,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.



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