10-year Treasury yield hits new high for the year after very hot producer prices reading
Investors work on the floor at the New York Stock Exchange.
Brendan McDermid | Reuters
The yield on the 10-year U.S. Treasury note rose Wednesday as investors digested the effects of higher-than-expected wholesale prices in April.
The yield on the 10-year bond, the main indicator of US government debt, last increased by 1 basis point to 4.481%. It rose by 3 basis points to 4.49%, reaching its highest level since July 17.
The yield on the 2-year Treasury note, which more closely tracks short-term Federal Reserve interest rate policy, fell less than 1 basis point to 3.992%. The yield on the longer-dated 30-year Treasury note rose more than 1 basis point to 5.048%. It had previously increased by 2 basis points to 5.05%, reaching its highest level since July 17.
One basis point equals 0.01%, and yields and prices move in opposite directions.
The producer price index increased by a seasonally adjusted 1.4% during the month; This was well above the 0.5% Dow Jones consensus forecast and the upwardly revised 0.7% increase in March. This was the biggest monthly gain since March 2022.
On an annual basis, the index increased by 6%, the largest increase since December 2022.
“Wednesday’s PPI rose dramatically as producers felt the ripple effects of $100 per barrel, which increases the cost of production overall because energy is arguably the most critical input cost,” said Clark Bellin, president and CIO of Bellwether Wealth.
The Bureau of Labor Statistics reported Tuesday that non-seasonally adjusted consumer prices rose at an annual rate of 3.8% in April. This was the highest level since May 2023. That was more than the 3.7% annual inflation expected by economists surveyed by Dow Jones. Annual core inflation, excluding food and energy, increased by 2.8%, again above economists’ expectations of 2.7%.
By both measures, inflation remains much higher than the central bank’s stated 2% target, which the Fed is seeking to achieve its goal of maintaining stable prices in the economy.
Hot inflation readings could complicate the Federal Reserve’s progress.
“The Federal Reserve has an inflation problem on its hands at a time when the labor market is slowing, and that makes its job much more difficult, especially at a time when the central bank is ready to welcome a new president in the very near future,” Bellin said. he said.
— CNBC’s Lisa Kailai Han also contributed to this report.
