In the face of rising inflation, the US Treasury 10-year benchmark yield hit its highest level in at least the past three years, on Monday.
Indeed, the biggest 10-year US Treasury note jump registered 4 basis points, to 2.851%, in 2018. Early on Monday, April 18, the note saw growth of as much as 2.884%. Again, that is the biggest interval the note has seen since that last major jump, in 2018. In addition, the yield on 30-year Treasury bond notes rose just 2 points, to 2.937 percent.
This in mind, it is important to remember that investors continue to monitor the potential risks that rising inflation could bring. Just last week, for example, the United States Census Bureau reported growth of just a half a percent in March. This only barely fell short of the 0.6% the Dow Jones had been expecting. According to the data, gas station sales were the biggest driver for this metric. On Wednesday of last week, the United States Bureau of Labor Statistics revealed that the producer price index for March grew more than 11% on the year. This is the biggest jump in prices paid by wholesalers since 2010.
Perhaps more importantly, the producer price index data came out just one day after the most recent update to the consumer price index. This metric indicates that prices have inflated by 8.5% from the same time last year. This was the biggest such increase since 1981. Fortunately, the core Consumer Price Index for the month of March only buoyed up 0.3%, which is easily below the 0.5% that had been initially forecast.
On top of this, the more sensitive two-year yield fell to a low of 2.27, at one point, on Thursday. This is quite a drop from the year high of 2.60 percent, which was only a few weeks ago, on April 6, 2022. With two-year yields reeling some hint that the Fed may not raise rates by much—if at all—this year.
With core CPI growth smaller than expected, the Federal Reserve may need to raise rates at a smaller interval than had been originally thought. As inflation cools—and as fuel prices become more reasonable—short-dated yields should also see a decline. However, it does not appear that experts agree on the present inflation outlook; and since economic data for next week (and, perhaps, beyond) are currently thin, it does not appear a consensus will be reached any time soon.