US Treasury Yields Rise Amid CPI Data

US Treasury Yields, CPI Data, core inflation rate

Bloomberg – On Tuesday, the 10-year US Treasury Yields note saw its price rise just above 4.2%. This slight increase marked a rebound from its three-month low of 4.12% reached on December 6th. The financial markets are closely analyzing the latest Consumer Price Index (CPI data) report for clues about what the Federal Reserve might do in the coming months.

The CPI data showed an unexpected rise in headline consumer prices compared to the previous month. More notably, the core inflation rate, which excludes volatile food and energy prices, also accelerated. This data raises concerns about persistent high inflation. Shorter-term Treasury bills, which react more quickly to potential changes in the Federal Reserve’s rate decisions, experienced a significant spike. This movement led to a further deepening of the yield curve inversion – a situation where short-term yields are higher than long-term yields, often seen as a warning sign in financial markets.

The Federal Reserve is anticipated to maintain its funds rate at the current level in its year-end decision. However, given the tight labor market and indications that core inflation remains high, the Federal Open Market Committee (FOMC) might reconsider the market’s expectation of imminent interest rate cuts.