Bond yields, which move inversely to prices, have climbed in recent weeks as signs of persistent inflation erode expectations for how deeply the Federal Reserve will be able to cut interest rates without further fueling consumer prices. The yield on the benchmark 10-year note is up 80 basis points this year and last stood at 4.70%, a five-month high.
Further evidence that inflation is heating up again came on Thursday, with data showing the personal consumption expenditures price index excluding food and energy rose far more than expected in the first quarter. Futures markets showed investors now expect the Fed to deliver just 35 basis points in rate cuts this year, compared to the more than 150 points that were priced in at the beginning of 2024.
Some investors have used the weakness in bonds to add to their fixed income holdings, confident that yields are unlikely to rise much further unless the Fed says it is looking to once again raise its benchmark overnight interest rate from the current 5.25%-5.50% range. Others, however, have been skeptical inflation will cool anytime soon.
The price of Brent crude is up about 17% on a year-to-date basis, even after retreating in the last week on easing fears of a wider conflict in the Middle East.
Treasury Bond Yields Inflation
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