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10-year Treasury yield jumps back above 3% after hotter-than-expected inflation data


On Wednesday, the U.S. Treasury’s 10-year yield surged after key inflation data revealed a much faster than expected rise in prices.

The benchmark yield 10-year Treasury noteThe yield on the underlying stock rose by more than seven basis points, to 3.064%. 30-year Treasury bondTo 3.197%, I added almost 7 basis points. Yields change in the opposite direction to prices, and 1 basis points is equivalent to 0.01%.

April’s consumer price indexInflation’s key measure, CPI, increased 0.3% per month and 8.3% annually. The consensus Dow Jones forecast indicates that economists are expecting the CPI to increase 0.2% over the month before and 8.1% year-over-year. This compares to March’s 8.5% annual pace.

The Core CPI (which excludes volatile food and energy prices) saw a 0.6% increase month over month. Dow Jones surveyed economists and they expected a rise of 0.4%.

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Markets could welcome confirmation of an increase in annual inflation following the seemingly endless upward trend. Markets will likely be disappointed – the increase in inflation is yet another surprise, and it suggests that deceleration will be slow,” stated Seema Shah (chief strategist, Principal Global Investors). “The Fed is worried that inflation will continue to stagnate at an unbearably high level, as the focus shifts from where it peaked to where it plateaus.”

Inflation readings are important because they determine the Federal Reserve’s policy on interest rate increases. The Fed is concerned about slowing down economic growth due to increased pricing pressures as well as aggressive rate-hiking.

Madison Faller of JPMorgan Private Bank’s global market strategy, stated Wednesday on CNBC’s “Squawk Box Europe” that Fed policy “is having its intended effect by removing some pressure and slowing down things.”

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Faller claimed that some of the driving forces behind inflation are being slowed down by the Fed.

Her belief is that the slowdown and decline in demand are already visible in the housing market, with new 30-year mortgage rates “skyrocketing” to 5.5%.

“That’s really meaningful considering the housing market is the most cyclical part of the U.S. economy — 65% of Americans own a home and that tells us that the Fed is already doing its job,” she said.

Faller explained that it also indicates that interest rates could be held back if you have a negative economic feedback loop.

The conflict in Ukraine as well as Covid-19 lockdowns by China continue to be of interest to investors.

Market report by Hannah Miao of CNBC.