As traders awaited important inflation statistics that could provide additional hints as to when the Federal Reserve is likely to start reducing interest rates, U.S. Treasury yields increased on Thursday.
Favourable Inflation
Gains were momentarily offset by yields, though, after the US Treasury Department observed robust demand for a $25 billion offering of 30-year notes.
The consumer price index (CPI) for January is anticipated by traders on Tuesday. Data released last week revealed that earnings climbed by the greatest in almost two years last month, while job gains were significantly greater than anticipated.
This week, Fed officials—including Chairman Jerome Powell—stated that before lowering rates, they would like to see more proof that inflation will continue to drop.
Thomas Barkin, the president of the Richmond Fed, stated on Thursday that the challenge of accurately adjusting for seasonal variations around the start of a new year may be a contributing factor in the recent stronger-than-expected data on the U.S. economy.
Cutting Rates
Source-MARCA
Michael Lorizio, senior fixed income trader at Boston’s Manulife Investment Management, said, “The Fed continues to basically have a uniform message that it will be cutting rates, it doesn’t have to be immediate and that they would like to see a continuation of the favorable inflation data that they’ve seen recently.”
At the auction, the bonds were sold for a high yield of 4.360%, which was two basis points less than their previous trading price. It was the biggest bid-to-cover ratio since December, at 2.40 times.
Thirty-year rates hit a two-week high of 4.383% earlier, and they were last at 4.375%. A record $42 billion of 10-year notes were sold by the Treasury on Wednesday, and a $54 billion auction of three-year notes was held on Tuesday, drawing strong demand.
