U.S. Treasury yields climbed on Thursday as inflation data came in slightly hotter than expected.
The yield on the benchmark 10-year Treasury note rose 4 basis points to 1.98%. The yield on the 30-year Treasury bond climbed 6 basis points to 2.36%. Yields move inversely to prices and 1 basis point is equal to 0.01%.
The consumer price index, which measures a wide-ranging basket of goods and services, increased 7.9% over the past 12 months, a fresh 40-year high for the closely followed gauge. On a month-over-month basis, the CPI gain was 0.8%.
Economists surveyed by Dow Jones had expected headline inflation to increase 7.8% for the year and 0.7% for the month.
“Thursday’s inflation data is continued confirmation that inflation is not transitory and has not peaked,” said Robert Schein, chief investment officer at Blanke Schein Wealth Management. “We believe there will be even stronger inflation reports over the coming months, which suggests that the Federal Reserve needs to accelerate its rate hike plans, even with the renewed uncertainty that has emerged from the crisis in Russia and Ukraine.”
Meanwhile, the European Central Bank on Thursday announced it will wind down asset purchases faster than planned, before adding that it stands ready to revisit this decision if the outlook changes.
“The ECB came out decidedly more hawkish than expected — while policy rates were unchanged, in line with the consensus, the net takeaway was that the war in Eastern Europe requires a degree of policy flexibility,” said Ian Lyngen, BMO’s head of U.S. rates.
Investors remained concerned about the recent spike in commodity prices because of the Russia-Ukraine war. The fear has been that higher commodity prices could push headline inflation higher, while slowing economic growth, also known as “stagflation.”
However, commodities, including oil, silver and wheat did pull back on Wednesday. The drop in oil prices came amid indications of possible progress by the U.S. in encouraging more oil production from other sources. This comes following announcements of sanctions on Russian oil imports, in response to its invasion of Ukraine.
Russia and Ukraine’s foreign ministers are meeting for talks in Turkey on Thursday, with hopes that a peace deal for Ukraine could be in sight.
Auctions are scheduled to be held on Thursday for $45 billion of 4-week bills, $35 billion of 8-week bills and $20 billion of 30-year bonds.
— CNBC’s Hannah Miao, Yun Li and Holly Ellyatt contributed to this market report.
