Treasury yields retreat but the 10-year holds above 1.68%, following inflation data shock

U.S. Treasury yields retreated on Thursday morning, though the 10-year rate held above 1.68%, following a higher-than-expected inflation print.

The yield on the benchmark 10-year Treasury note fell to 1.6864% at 4:40 a.m. ET. The yield on the 30-year Treasury bond dipped to 2.4010%. Yields move inversely to prices.

The 10-year yield closed the previous session at 1.70%, it’s highest point in over a month, after a key inflation report showed prices increased faster than expected.

April’s Consumer Price Index rose 4.2%, its biggest year-on-year increase since 2008 and well above the consensus forecast of 3.6%.

Inflation has been a growing concern for investors, but the Federal Reserve has insisted any price rises should be transitory, with the re-opening of the economy in the recovery from the coronavirus pandemic.

Carl Weinberg, chief economist at High Frequency Economics, told CNBC’s “Squawk Box Europe” on Thursday that he agreed with comments made by Fed Vice Chair Richard Clarida following the inflation report, that the price rises looked to be transitory.

Weinberg believed that part of reason for this “transient shock” in inflation was that people had been spending much more on goods than services, with the sector closed due to public health restrictions in the last year.

However, as the service sector opened back up, Weinberg argued this would “equalize price pressures” between spending on goods and services.

He believed it was a case of waiting “a month or two and things, I think, are going to look a lot better on the inflation front and the growth front when we get to the end of the summer.”

In terms of data out Thursday, April’s Producer Price Index is expected to be released at 8:30 a.m. ET. PPI is also an indicator of inflation, though not as direct as CPI, as it looks at price growth from the perspective of producers.

Weekly jobless claims data is also due out at 8:30 a.m. ET.

Fed Governor Christopher Waller is the latest central bank member to make a speech this week on the U.S. economic outlook and monetary policy, at the Global Interdependence Centre’s 39th Annual Monetary and Trade Conference, at 1p.m. ET.

Auctions will be held Thursday for $40 billion of four-week bills, $40 billion of eight-week bills and $27 billion of 30-year bonds.


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