US Yields Higher After Strong Inflation Data

Treasury yields touched their highest levels in more than two weeks on Wednesday after a strong reading on consumer-price inflation was seen strengthening the Federal Reserve’s case for raising interest rates as early as March. The yield on the 10-year Treasury note TMUBMUSD10Y, +1.86% rose to 2.517%, its highest level since Jan. 27, while the yield on the two-year Treasury note TMUBMUSD02Y, +1.65% rose 2.5 basis points to 1.259%, its highest level sine Jan. 9.

The yield on the 30-year Treasury bond TMUBMUSD30Y, +1.30% rose 4.3 basis points to 3.097%, its highest since Feb. 3. Yields rise as bond prices fall.

Market strategists attributed the move to a stronger-than-anticipated reading on consumer-price inflation, which accelerated to 2.5% during the 12 months ending in January. Federal Reserve Chairwoman Janet Yellen rattled the Treasury market on Tuesday while testifying before the Senate Banking Committee when she said waiting too long to raise interest rates would be “unwise.”

“Yesterday, we saw a hawkish Fed. Now, we’re getting corroboration on the data side of things,” said Subadra Rajappa, fixed-income strategist at Société Générale. Market-based expectations for a March hike also rose after the data. The CME Group’s FedWatch tool, which derives rate-hike odds from activity in the Fed funds futures market, put the probability of a hike at 22%.

via MarketWatch

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza