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Treasury yields fall as investors assess inflation outlook

Treasury yields declined on Thursday as investors digested wholesale inflation figures and awaited remarks from Federal Reserve speakers.

At 4:27 a.m. ET, the yield on the benchmark 10-year Treasury was down by around one basis point to 3.3624%. The 2-year Treasury was trading at 4.0611% after falling by more than one basis point.

Yields and prices move in opposite directions and one basis point is equivalent to 0.01%.

On Wednesday, December’s producer price index report showed that wholesale inflation fell by more than expected on a monthly basis. It declined by 0.5% rather than the 0.1% expected by economists previously surveyed by Dow Jones.

Paired with last week’s consumer price index print, which reflected that consumer prices fell by 0.1% in December, some investors are now considering whether the peak of inflation has passed.

The inflation readings could inform whether the central bank will announce another 50 basis point rate hike or slow the pace of increases to 25 basis points at the conclusion of its next meeting on Feb. 1.

 

Many are hoping for the central bank to slow, or entirely pause, rate hikes this year as the pace of rate increases implemented by the Fed in its fight against high inflation so far has sparked recession fears.

Investors are therefore closely following remarks from Fed speakers, who have painted a mixed picture so far. Boston Fed president Susan Collins is due to make remarks on Thursday.

Also due on Thursday are preliminary building permit figures for December, initial jobless claims data and the Philadelphia Fed Manufacturing Index for January, which reflects factory activity in the area.

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