Treasury yields rise after as investors look ahead to key inflation data

U.S. Treasury yields rose on Tuesday as investors eagerly awaited headline inflation data on Thursday and evaluated the latest developments in U.S.-Iran war negotiations.

The yield on the 10-year U.S. Treasury note, the key benchmark for U.S. government debt, rose more than 3 basis points to 4.483%.

The yield on the 2-year Treasury note, which more closely tracks short-term Federal Reserve interest rate policy, rose more than 3 basis points to 4.217%. The yield on the longer-dated 30-year Treasury note rose more than 1 basis point to 4.919%.

One basis point equals 0.01%, and yields and prices move in opposite directions.

These moves come after the United States and Iran agreed on a road map to reach a deal within 60 days to end the war. But President Donald Trump has also threatened more military action against Iran. Meanwhile, Tehran announced that it has closed the Strait of Hormuz once again.

While crude prices fluctuated, with Brent trading more than 1 percent lower (giving up previous gains), WTI futures rose just 0.5 percent.

An important test for the market this week will be data on the personal consumption expenditures price index, the Fed’s preferred inflation indicator, to be released on Thursday in May. Even excluding volatile food and energy prices, core PCE is expected to rise starting in April, according to economists surveyed by FactSet.

Last week’s Fed meeting, which struck a more hawkish tone than many market watchers expected, saw expectations for a rate hike postponed until October. Investors are now focused on any inflation readings that could signal that the US central bank could start raising interest rates soon.

Last Wednesday, Kevin Warsh’s first meeting as chairman of the Federal Reserve ended with the 12 voting members of the Federal Open Market Committee taking a more hawkish stance on interest rates and hinting at possible future rate hikes. The meeting saw the committee omit key language from its significantly shorter policy statement that had previously signaled a bias towards future rate cuts.

The Fed left its benchmark federal funds rate unchanged at 3.5%-3.75%.

— CNBC’s Sean Conlon also contributed to this report.