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Treasury yields are mixed following lower-than-expected inflation


U.S. Treasury yields were mixed on Wednesday morning, following data which showed lower-than-expected inflation.

The yield on the benchmark 10-year Treasury note rose less than a basis point to 1.28% at 3:50 a.m. ET. The yield on the 30-year Treasury bond fell by nearly 1 basis point to 1.845%. Yields move inversely to prices and 1 basis point is equal to 0.01%.

The 10-year yield fell to 1.277% on Tuesday, after August’s consumer price index increased by 5.3% year-on-year, below a forecast of 5.4%. The core CPI rose by just 0.1% month-on-month in August, below an expected increase of 0.3%.

Willem Sels, chief investment officer, private banking and wealth management at HSBC, said on Tuesday that the data should “provide some comfort that inflation does not seem to be accelerating any further, and that the Fed can therefore take a gradual approach to policy normalization and tapering.”

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Sels said that HSBC expected inflation to come down later in the years, partly because “commodity price base effects will become more deflationary near year-end.”

“However, there is uncertainty about the speed and the extent of the fall, as many variables influence inflation,” he added, referring to the increased spread of the delta variant and supply chain issues.

In terms of economic data due out on Wednesday, August’s import and export prices are set to be released at 8:30 a.m. ET. Industrial production data for August is then due to come out at 9:15 a.m. ET.

An auction will be held on Wednesday for $30 billion of 119-day bills.



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