Treasury yields fell again on Friday morning. As investors shrugged off the 5% annualized inflation rate reported in the previous period. And it appears to buy the Federal Reserve’s argument that the price hike will be temporary.
The yield on the 10-year Treasury bill fell by more than 1 basis point to 1.447% shortly after 7 AM ET. The yield on the 30-year Treasury Treasury dropped a similar amount to 2.139%. (Basic score is 0.01 percent score)
The main consumer price index rose 5% in May year-on-year. That was the highest since the summer of 2008 and was higher than the 4.7 percent increase expected by economists by the Dow Jones.
Excluding food and energy, core CPI rose 3.8% year-on-year. This was the highest growth rate since 1992, with a third of the increase being the result of a sharp 7.3 percent rise in used car and truck prices.
even so Yields have also fallen sharply from March, when the past 10 years have traded above 1.7% as the economic reopening has been under pressure. The benchmark yield traded above 1.6% last week.
Fed officials including Chairman Jay Powell has repeatedly emphasized that High inflation readings are expected in the spring and summer. But it tends to happen only temporarily. The central bank said it was willing to let inflation stay above its original 2 percent target as the economy recovers from the pandemic.
Nannette Hechler Fayd’Herbe, chief investment officer at Credit Suisse International Wealth Management, said Treasury yields had fallen recently despite rising inflation. but can also be explained The “slowing growth momentum” of the economy
She said the market will enter another phase soon. This was driven by advice the central bank would give on monetary policy. The next Federal Reserve policy meeting on June 15 and 16 may “open the market to… the second wave of interest rates rising as future monetary policy expectations will adjust. Hechler Fayd’Herbe expects higher returns for the longer-lived Treasurys in the second half of the year.
The University of Michigan is scheduled to release national data for June on economic indicators at 10 a.m. ET on Friday, including consumer sentiment and inflation expectations.
There is no auction as it takes place on Friday.
— CNBC’s Patti Domm contributed to this report.