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Tags: Financial Markets | Money | U.S. Treasury bond | Consumer Price Index | CPI | inflation

Short-term Yields Rise, Curve Flattens After CPI Data

Treasury Department
Department of the Treasury. (AP)

Wednesday, 13 October 2021 10:20 AM

Yields on shorter-term Treasuries rose on Wednesday, while longer-dated yields dipped following data on consumer prices that further fanned rising inflation concerns. The consumer price index rose 0.4% last month after climbing 0.3% in August, the Labor Department said on Wednesday.

In the 12 months through September, the CPI increased to 5.4% after advancing to 5.3% year-on-year in August. The yield on the two-year Treasury note, which typically moves in step with interest rate expectations, was up 2.2 basis points to 0.370% after reaching a high of 0.394%, its highest since March 24, 2020.

The three-year note yield was up 1.8 basis points to 0.659% after climbing to 0.701%, its highest since March 5, 2020. But longer-dated yields fell, indicating the market is still not pricing in a sustained period of inflation, which served to flatten the yield curve.

'The Inflation Story Just Continues to Mount'

"Obviously there is enough there for people to continue the flattening trade and just take intermediate Treasury yields to fresh highs," said Jim Vogel, interest rate strategist at FHN Financial in Memphis, Tennessee. "So the inflation story just continues to mount with just sort of any news people will find reasons to be more concerned about inflation."

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at 118.2 basis points after falling to 118.1, its lowest level in two weeks. The curve had steepened to a 3-1/2 month high of 129.7 on Friday.

On Tuesday, three U.S. Federal Reserve policymakers on Tuesday said the economy has healed enough for the central bank to begin to withdraw its crisis-era support, cementing expectations the Fed will start to taper its monthly bond purchases as soon as next month.

The yield on 10-year Treasury notes was down 2.6 basis points to 1.554%. An auction of $24 billion of 30-year bonds is scheduled for 1 p.m. EDT (1700 GMT) Wednesday. The Treasury auctioned $58 billion of three-year notes and $38 billion of 10-year notes on Tuesday. The yield on the 30-year Treasury bond was down 4.9 basis points to 2.056%.

© 2021 Thomson/Reuters. All rights reserved.


StreetTalk
Yields on shorter-term Treasuries rose on Wednesday, while longer-dated yields dipped following data on consumer prices that further fanned rising inflation concerns.
U.S. Treasury bond, Consumer Price Index, CPI, inflation
362
2021-20-13
Wednesday, 13 October 2021 10:20 AM
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