2- and 10-year Treasury yields at highest levels since December after consumer price index revisions

Treasury yields closed higher on Friday after minor revisions to US inflation data boosted investors’ economic optimism.

What happened

  • The 2-year Treasury yield BX:TMUBMUSD02Y rose 3.2 basis points to 4.486%, from 4.454% on Thursday. For the week, the rate rose 11.8 basis points.

  • The yield on the 10-year Treasury note BX:TMUBMUSD10Y advanced 1.7 basis points to 4.186%, from 4.169% on Thursday. It rose 15.6 basis points this week.

  • The 30-year Treasury yield BX:TMUBMUSD30Y was slightly higher at 4.380%, compared to 4.376% on Thursday. It rose 15.4 basis points this week.

  • Friday’s levels for 2-year and 10-year rates were the highest since Dec. 12, based on Dow Jones Market Data data as of 3 p.m. Eastern time. The 2-, 10- and 30-year rates each posted their biggest weekly advances since the period ending Jan. 19.

What drove the markets

Friday’s batch of data brought only minor adjustments to the consumer price index for the final months of 2023.

The December figure was revised downwards by a tenth, to 0.2%, while the November figure was revised upwards by the same amount, to 0.2%. Meanwhile, the annual core inflation rate for the fourth quarter remained the same at 3.3% after seasonal factors.

Analysts viewed the revisions to the consumer price index as rather minor, considering the risk of changes that could show inflation was higher than initially reported.

Dallas Fed President Lorie Logan said during an appearance Friday that she saw no urgency for the Federal Reserve to lower interest rates.

What the analysts say

“The focus next week will be the CPI report” for January released on Tuesday, said US economist Michael Reid of RBC Capital Markets.

“Our forecasts call for a [month-to-month] 0.2% increase in the stock and 0.3% increase in the core,” Reid wrote in a note Friday. “This would bring the [year-to-year] pace at 2.9% and 3.8% for the stock and core respectively. While progress in the core on a [year-to-year] base is slow, a monthly figure of 0.3% is consistent with the “more positive data” that the Fed wants to see”.

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