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The 10-year U.S. Treasury yield jumped on Wednesday after a release of key inflation data showed a faster-than-expected rise in prices.
The yield on the benchmark 10-year Treasury note rose more than 3 basis points to 3.023% and the yield on the 30-year Treasury bond ticked up 1 basis points to 3.14%. Yields move inversely to prices and 1 basis point is equal to 0.01%.
Treasurys
April’s consumer price index, a key measure of inflation, rose 0.3% month over month and 8.3% year over year. Economists expect the CPI to rise 0.2% from the month prior and 8.1% year over year, according to the Dow Jones consensus estimate. That compares with March’s 8.5% year-over-year pace.
Core CPI, which strips out volatile food and energy prices, saw an even bigger month-over-month jump of 0.6%. Economists surveyed by Dow Jones were expecting a 0.4% rise.
The inflation reading is important given that this data is largely determining the Federal Reserve’s direction on raising interest rates. Both pricing pressures and more aggressive rate hiking have fueled concerns about a slowdown in economic growth.
Madison Faller, global market strategist at JPMorgan Private Bank, told CNBC’s “Squawk Box Europe” on Wednesday that she believes that Fed policy is “having its intended effect in removing some of the pressure and slowing things down.”
Faller said the Fed is trying to quell some of the demand that’s helping drive inflation.
She believes that the slowdown in demand is already being reflected in the housing sector, as new 30-year mortgage rates have “skyrocketed” to 5.5%.
“That’s really meaningful considering the housing market is the most cyclical part of the U.S. economy — 65% of Americans own a home and that tells us that the Fed is already doing its job,” she said.
“But what that also tells us is that forward trajectory for interest rates from here might be capped as you have that negative economic feedback loop,” Faller added.
Investors also continue to focus on the the conflict in Ukraine and Covid-19 lockdowns in China.
— CNBC’s Hannah Miao contributed to this market report.
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