Treasury yields edged lower on Wednesday as a much-anticipated inflation figure was flat from a month earlier.
The yield on the benchmark 10-year Treasury fell 9 basis points to 2.67%, hitting a one-week low. The yield on the 30-year Treasury note fell 6 basis points to 2.96%. Yields move inversely to prices, and one basis point is equal to 0.01%.
The sharp drop in yields came as data showed the consumer price index rose 8.5% in July from a year ago, unchanged from June’s pace and lighter than Dow Jones expectation of 8.7%.
Excluding volatile food and energy prices, the so-called core CPI rose 5.9% year-on-year and 0.3% month-on-month, compared with estimates of 6.1% and 0.0% respectively. 5%
The inflation report suggested to some that price pressures may have peaked, which could lead to speculation that the Federal Reserve could pursue a smaller interest rate hike next month.
“Overall, incremental confirmation that the Fed’s efforts to combat rising consumer prices have been successful,” Ian Lyngen, BMO’s head of U.S. rates, said in a note. “The combination of NFP and CPI for July keeps the debate alive about the 75bp hike versus September’s 50bp. Also, this means volatility around incoming data will remain high.”
The central bank has raised benchmark borrowing rates by 2.25 percentage points until 2022, with inflation figures well ahead of its long-term target of 2%. Fed officials have recently signaled that more rate hikes are on the horizon.
Elsewhere, Chicago Fed President Charles Evans and Minneapolis Fed President Neel Kashkari on Wednesday are scheduled to make statements on U.S. economic conditions at separate events.
The US Treasury will auction $35 billion in 10-year notes and $30 billion in 119-day notes.
– CNBC’s Patti Domm contributed to this report.