Market Pulse: Treasury Yields Dip on Softer Inflation Data
The bond market is breathing a sigh of relief as the 10-year Treasury yield dropped significantly on Wednesday, following the release of key inflation data. The yield fell 13 basis points to 4.653%, marking a retreat from the 14-month high reached just a day earlier. The 2-year Treasury yield also declined, shedding around 10 basis points to 4.27%.
Inflation Concerns Ease
The core consumer price index, which excludes volatile food and energy prices, slowed to 3.2% on an annualized basis in December. This is slightly below the 3.3% figure anticipated by economists. The core inflation rate grew 0.2% on the month, also lower than expected. Meanwhile, the non-core index rose 0.4% on the month, bringing the 12-month rate to 2.9%.
Expert Insights
According to Tina Adatia, head of fixed income client portfolio management at Goldman Sachs Asset Management, “Today’s softer than expected core CPI reading should help cool fears of a reacceleration in inflation.” This data comes on the heels of the producer price index, which showed wholesale prices rose less than expected in December.
Federal Reserve Watch
While the latest inflation data may not be enough to prompt a rate cut at the Federal Reserve’s January meeting, it does strengthen the case for further easing in the future. As Adatia notes, “With labor market data remaining robust, however, the Fed has scope to be patient and more good inflation data will be required for the Fed to deliver further easing.”
What’s Next?
Investors will be keeping a close eye on upcoming data releases, including retail sales and housing starts, which are set to be announced later in the week. These figures will provide further insight into the state of the economy and could impact market expectations for future interest rate decisions.
Leave a Reply