U.S. Treasury yields inched lower on Wednesday as investors assessed the state of the U.S. economy amid a tame inflation report and a U.S.-China trade agreement.
At 3:47 a.m. ET, the 10-year Treasury yield was down over 3 basis points to 4.468%, while the 2-year Treasury yield was lower by over one basis point to 4%.
One basis point is equivalent to 0.01%, and yields and prices move in opposite directions.
Investor worries about the effects of tariffs on the U.S. economy were calmer on Wednesday after inflation came in lighter than expected on Tuesday, and showed that prices hadn’t increased massively yet.
The consumer price index for April rose 2.3% on an annual basis, coming in below the 2.4% increase forecast by economists, according to Dow Jones. Meanwhile, core inflation — which excludes food and energy prices — came in at 2.8%, matching expectations.
The Federal Reserve warned of stagflation in its May meeting, owing to high tariffs implemented by U.S. President Donald Trump in April.
However, a series of positive developments including a 90-day pause on reciprocal tariffs for most countries, a trade deal with the U.K. and an agreement with China to temporarily drop most levies has assuaged the threat of stagflation.
Deutsche Bank analysts noted that the “broad impact” of tariffs was “muted” in the inflation data.
“Our US economists think the April data is still too early for the Liberation Day tariffs to show up in the aggregate numbers, and they don’t expect the effects to show up in consumer prices until June,” the analysts said in a note.
Investors will also look ahead to the release of the producer price index and retail sales data on Thursday for more insights into the economy.
