Treasury yields rise as investors watch US consumer inflation report

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Treasury yields rose early on Wednesday as fixed income investors awaited the latest reading on consumer price inflation in the United States.

October’s Consumer Price Index data is due at 8:30 a.m. ET. Investors will also keep an eye out for the weekly update on Americans seeking Unemployment Insurance benefits at the same time that is released a day earlier than usual given that Thursday is Veterans Day, one day. US federal holiday.

A wholesale stocks report is due at 10 a.m. and a 30-year Treasury bond auction later in the session will also be on investor radars.

What do the returns do?
  • The 10-year Treasury rate TMUBMUSD10Y,
    1.476%
    was at 1.480%, down from 1.431% at 3 p.m. ET on Tuesday.

  • The 2-year Treasury note TMUBMUSD02Y,
    0.454%
    returns 0.451%, up from 0.409% a day ago.

  • The 30-year Treasury bill rate TMUBMUSD30Y,
    1.847%
    is at 1.855%, against 1.820% on Tuesday.

What drives the market?

Fixed income markets have been choppy in recent trading, with fluctuations in returns driven less by fundamentals such as economics and more by positioning as the Federal Reserve begins to pull back policy measures that have been introduced last year to combat the impact of the coronavirus pandemic on the economy.

However, inflation, which can cut corners on a fixed value of bonds, continued to climb above the Fed’s annual inflation target of 2%.

A CPI reading is expected to rise on both the overall base and the 0.6% and 0.4% base, respectively. The annual CPI is expected to rise 5.8%, marking the highest level in 30 years.

The CPI update comes a day after the announcement of rising wholesale prices in the United States.

The inflation reports come as China announced on Tuesday that its own ex-factory prices jumped 13.5% in October, representing the highest level since 1996. However, consumer prices in Beijing rose only 1.5% to a 13-month high, mainly due to higher prices for food and volatile fuels.

The Fed, at the conclusion of its policy meeting on November 3, pledged to be patient with reducing easy money policies and normalizing interest rates, which helped mitigate some of the upward pressure on government debt yields, but other signs of a surge in inflation could reignite concerns.

Looking ahead, investors will expect a $ 25 billion 30-year bond auction at 1 p.m., after a $ 39 billion 10-year T-bill sale described as “soft,” according to the reports. BMO Capital Markets strategists.

What analysts say

“We still believe that rates will rise in the first quarter of 2022 as the Fed cuts and seeks to raise rates by mid-2022,” wrote managing director Tom di Galoma of Seaport Global Holdings, in a statement. daily note.


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