Treasury prices fell, nudging yields higher, on Thursday, a day after fears sparked by a fresh round of tariffs from Trump administration had fueled buying in assets perceived as havens.
The two-year Treasury note yield TMUBMUSD02Y, -0.14% edged 1.6 basis points higher at 2.594%, retouching its loftiest rate since late July 2008, according to WSJ Market Data Group.
The bond market keyed into a report on inflation, which suggested price pressures were picking up throughout the economy. This is likely to keep the Federal Reserve on track to raise rates two more times this year. Inflation for June came in at a 0.1% increase, below the consensus estimate of 0.2% based on economists polled by MarketWatch. But on a year-over-year basis, consumer prices were climbing at an annual pace at 2.9%, a six-year high.
“The overall picture is one in which just about every facet of the economy is starting to generate price pressures. There will still be monthly fluctuations here, but by and large the distribution of price increases is more balanced than it has been in a long time. That’s good evidence that strong economic performance will over time push broad prices higher,” said Eric Winograd, senior economist for AB.
That report comes a day after the producer-price index, which measures prices that businesses receive for their goods and services, rose 0.3%, above the 0.2% expected from economists polled by MarketWatch.
The lack of a substantial selloff suggested investors mostly ignored the bearish implications of rising price pressures. Inflation can chip away a bond’s fixed value and provide some impetus for Fed policy makers to quicken their pace of rate