Investors Evaluate The Prospects For Inflation And Economic Development As Treasury Rates Increases

Early on Wednesday, Treasury rates climbed, with the 10-year maturity hanging around the 3% level, as investors evaluated the prospects for inflation and economic development ahead of a widely anticipated May consumer-price index data.

What are the results?

It was at 3.008 percent at 3 p.m. EDT on Tuesday, up from 2.969 percent at 3 p.m. EDT the previous day.

As of Tuesday afternoon, the TMUBMUSD02Y’s yield was 2.749 percent, down from 2.733 percent the previous day.

On Wednesday afternoon, the TMUBMUSD30Y 30-year Treasury bond yield TMUBMUSD30Y was 3.154 percent, up from 3.121 percent on Tuesday night.

What is the market’s primary motivator?

After a dip on Tuesday, the yield on the 10-year treasury was back on the increase. Because of the Fed’s ongoing tightening of monetary policy and its focus on economic growth and inflation, the May CPI is expected to be a key data point this week.

The year-over-year rate is expected to fall from 8.3 percent to 8.2 percent, according to economists. This would be a decrease from more than a 40-year high of 8.5% in March, but it would still be high. Compared to April, the core reading, which excludes food and energy expenses, is expected to fall to 5.9 percent year-over-year.

Forecasts based on fixes, or derivative-like products, suggest that Friday’s year-over-year consumer price index reading for May will come in at 8.5%. Economists surveyed expect the rate to rise over 8.2 percent, which would equal a 40-year peak set in March. Inflation is expected to rise to 8.6 percent in June and July, and 8.8 percent in August and September, according to fixings dealers. 8 percent is forecast for October’s reading.

Investors anticipate that policymakers at the European Central Bank will lay the framework for ending asset purchases next month and perhaps beginning rate hikes when they meet on Thursday.

A $33 billion tranche of 10-year notes will be sold by the Treasury on Wednesday.

US economic statistics for April’s wholesale inventories will be released at 10 a.m.

Analysts’ opinions

Volatility in the yields is the name of the game.” With no apparent trigger from economic data or Fed words and equities markets behaving well, 10Y UST rates slipped down below the 3 percent threshold yesterday,” noted analysts at UniCredit Bank in a report.

A money-market analyst at Jefferies, Thomas Simons, said in a note previewing the auction of 10-year notes: “Auctions in COVID-era have generally been actively bought, but cracks have appeared in the last few months as the market has dropped down.” 6 out of the last 7 10-year auctions have tailed despite decreased auction amounts.