U.S. Treasury yields eased on Wednesday as investors digested the latest inflation data and considered what it could mean for interest rates.
The yield on the 10-year Treasury was last nearly 2 basis points lower to 4.3% after climbing by as many as 15 basis points on Tuesday. The 2-year Treasury yield was down by around 5 basis points to 4.61%. On Tuesday, it rose by as many as 19 basis points.
Yields and prices move in opposite directions and one basis point equals 0.01%.
Treasury yields had soared on Tuesday after January’s consumer price index reading came in hotter than expected.
Prices increased by 0.3% in January from December and by 3.1% on an annual basis. Economists previously polled by Dow Jones had been expecting prices to rise by 0.2% and 2.9%, respectively.
The data prompted renewed concerns that interest rate cuts would not begin for some time and that there could be fewer rate cuts than expected this year. U.S. Federal Reserve officials have in recent weeks said they are looking to economic data to boost their confidence that inflation is moving back to the 2% target range before making decisions about rate cuts.
Traders were last pricing in just an 8.5% chance of a March rate cut according to CME Group’s FedWatch tool, down from around 80% a few weeks ago.
With the expectation that rates will stay higher for longer come renewed concerns that elevated interest rates could lead to an economic downturn â a fear that has persisted among investors since the Fed’s rate-hiking cycle began in early 2022.
Investors are now looking to fresh comments from Fed officials and data releases throughout the week for hints about the rate outlook and the state of the economy.
