Treasury yields pulled back on Thursday as worries over persistent inflation and global trade tensions appeared to ease.
The 10-year Treasury yield fell more than 10 basis points to 4.531%. The 2-year Treasury yield dipped nearly 6 basis points to 4.307%.
One basis point equals 0.01%. Yields and prices move in opposite directions.
Data Thursday showed the producer price index, which measures what producers get for their goods and services, increased by a seasonally adjusted 0.4% in January. Economists polled by Dow Jones anticipated a 0.3% advance. Excluding food and energy, core PPI was up 0.3%, in line with the forecast.
Despite the hotter number on the surface, the January PPI report and consumer price index data point to a softer PCE price index than traders feared. That PCE measure, which will be released in February, is what the Federal Reserve closely tracks.
“The PPI for Jan ran hot on the headline, but some of the details were dovish,” Adam Crisafulli, founder of Vital Knowledge, said in a note. “After the hot CPI on Wed, people are viewing the PPI as a welcome surprise.”
On the tariffs front, President Donald Trump signed a memorandum laying out a plan for “reciprocal tariffs” on goods from foreign nations. That said, the retaliatory levies won’t go into effect immediately. Instead, Trump said Commerce Secretary nominee Howard Lutnick will look into the appropriate tariffs for each country.
Treasury yields had jumped on Wednesday after a hot consumer inflation report. The consumer price index rose 0.5% on a monthly basis in January and 3% from a year earlier. Economists surveyed by Dow Jones had been expecting increases of 0.3% and 2.9%, respectively.
So-called core inflation, which excludes food and energy costs, rose 0.4% for the month and 3.3% on an annual basis. That was also higher than the expected 0.3% monthly rise and the 3.1% year-over-year increase.
“Bottom line, persistent inflation is apparent even before tariffs but taking some of the healthcare components that flow into PCE and that were benign is why bonds are rallying,” said Peter Boockvar, chief investment officer at Bleakley Financial Group.
