WASHINGTON- US Treasury yields rose further on Wednesday as traders speculated that stubborn US inflation evident in recent data may convince the Federal Reserve to hold off cutting rates until after June, the timeframe currently priced in by markets.
Benchmark 10-year notes yields were last up 3.1 basis points (bps) on the day at 4.187 percent, marking three consecutive days of increases. Two-year yields were little changed at 4.615 percent.
This follows Tuesday’s report showing the consumer price index (CPI) rising 0.4 percent last month, driven largely by higher costs for gasoline and shelter. So-called core prices – excluding food and energy prices – also gained 0.4 percent . Headline prices rose 3.2 percent on an annual basis, while core prices gained 3.8 percent.
Traders in Fed funds futures reduced bets that the Fed will cut rates by June to 66.7 percent , from 70 percent on Tuesday, according to the CME Group’s FedWatch tool.
No Fed policymakers are scheduled to speak this week ahead of the central bank’s March 19-20 meeting.
“This has been the dynamic since December – the battle between market expectations of what the Fed is going to do and the Fed’s expectations of themselves,” said Jack McIntyre, portfolio manager for global fixed income at Brandywine Global.
The inversion in the yield curve between two-year and 10-year notes narrowed to minus 43.4 basis points from minus 44 basis points on Tuesday.