U.S. Treasury yields slipped on Wednesday as the latest report on U.S. consumer prices disappointed traders who bet inflationary pressures would hurt the value of long-term government bonds.
What are Treasurys doing?
The 10-year Treasury note yield
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What’s driving Treasurys?
Bond yields retreated after January consumer prices data showed more lasting inflationary pressures still remained absent. The consumer price index climbed 0.3% last month, but the increase was mostly due to higher energy costs.
The report may deflate speculation that price levels were set to rise substantially this year as the combination of supply-chain disruptions, fiscal relief measures and vaccine rollouts spurs a deluge of spending from consumers.
In a Wednesday speech, Federal Reserve Chairman Jerome Powell said “inflation has been much lower and more stable over the past three decades than in earlier times.” He argued the central bank would remain committed to supporting the economy.
The U.S. Treasury Department’s $41 billion sale of 10-year notes was taken by the market in stride, with analysts suggesting the recent rise in long-term bond yields had helped draw bond buyers.
What did market participants say?
“One month’s report is never enough to spark a rally, but it certainly shifted the bias toward slower adoption of the reflation trade. After all, the reflation mantra has been front and center since October,” said Jim Vogel, an interest-rate strategist at FHN Financial.
