Key 10-year Treasury yield hovers near highest level in months as retail sales beat estimates

The benchmark Treasury yield were little changed on Wednesday after U.S. retail sales easily topped expectations, adding to fears of potential inflation during the post-Covid economic recovery.

The yield on the 10-year Treasury note traded at 1.299% at roughly 2:05 p.m. ET, while the yield on the 30-year Treasury bond slipped to 2.075%. The 10-year yield traded above 1.31% earlier in the day, marking the highest level in nearly a year. Yields move inversely to prices.

Data for retail sales in the U.S. in January showed a 5.3% jump. Economists expected retail sales rose by 1.2% after a surprise 0.7% decline in December, according to Dow Jones. 

Producer price data for January also came in higher than expected, adding to inflation fears. The Bureau of Labor Statistics saying the 1.3% jump was the highest on record for the index.

Mark Heppenstall, the chief investment officer for Penn Mutual Asset Management, said the upside surprises for economic data are pushing yields back to their pre-pandemic levels.

“I just think that things have to normalize on the rate side given what I think will be better-than-expected readings since the free fall,” Heppenstall said.

The investor also said that a rapid rise for yields could draw the attention of the Federal Reserve and spark more discussion about altering the central bank’s asset purchases to tamp down longer-term rates.

The minutes from the latest meeting of the U.S. central bank’s Federal Open Market Committee were also released Wednesday, showing “participants observed that the economy was far from achieving the Committee’s broad-based and inclusive goal of maximum employment.”

An auction were held Wednesday for $27 billion worth of 20-year bonds.

— CNBC’s Patti Domm contributed to this report.