Treasuries Rebound as Inflation Data Looms
Treasury yields eased after Wednesday's sharp selloff as investors anticipate inflation readings for guidance on U.S. interest rate trajectory.
The 10-year note yield declined three basis points to 4.60% after a surge of up to 12 basis points in the previous session. The move followed comments from President Trump suggesting imminent reciprocal tariffs from the U.S.
Wednesday's surprisingly strong consumer price inflation data caused a sell-off in government bonds, leading traders to push back expectations for a Federal Reserve rate cut to December.
Markets now await the release of producer price inflation figures later Thursday and a 30-year bond auction to assess the validity of yesterday's recalibration.
"Adjusting for fewer cuts this year is sensible," said Henrietta Pacquement of Allspring Global Investments. "The U.S. faces uncertainty from the administration's policies, which is impacting prices."
Before Wednesday's data, traders anticipated two Fed rate cuts. Those bets have been revised to just one this year. However, Thursday's recovery could gain momentum if industrial price growth signals stabilization, according to Elias Haddad of Brown Brothers Harriman.
"Cooling in core services PPI inflation today can alleviate concerns about price resurgence," Haddad said. "It could lead to a repricing of U.S. rate expectations towards 50 basis points of easing in 2025."
Investors will also monitor the $25 billion auction of 30-year bonds later Thursday. Yesterday's 10-year note sale yielded the highest coupon since 2007.