U.S. Government Bond Yields Climb Following Consumer-Price Data -- Update
By Sebastian Pellejero
U.S. government bond yields posted their biggest one-day climb
in almost two months Wednesday after new data showed consumer
prices surged in April, a sign that the economic recovery is still
picking up steam.
The yield on the benchmark 10-year Treasury note finished the
session at 1.693%, according to Tradeweb, up from 1.623% at
Tuesday's close. That marks the largest single-session gain since
Yields, which rise when bond prices fall, shot up after the
Labor Department reported its consumer-price index jumped 4.2% in
April from a year earlier -- the highest 12-month level since the
summer of 2008 -- due to supply bottlenecks and surging demand as
the coronavirus pandemic eased.
Rising consumer prices worry bondholders because inflation
erodes the value of bonds' fixed payments and can lead the Federal
Reserve to raise interest rates.
Analysts and investors are parsing through April's data to gauge
the extent of what many expect to be a monthslong rise in prices.
Some believe that faster-than-expected growth and inflation, fueled
by the distribution of stimulus money and vaccines, may force the
Fed to tighten its easy-money policies, which have included holding
interest rates near zero and buying billions of dollars worth of
"The market is trying to reorganize its thoughts about what
today's [inflation] data means for the months ahead," said Jim
Vogel, interest rates strategist at FHN Financial.
The Fed expects inflation to climb this year. But central-bank
officials have said they anticipate that rise to be transitory and
to fall short of its new goal of averaging 2% over time. That means
letting prices rise faster than 2% for some time to make up for
periods of lower inflation.
In a speech Wednesday after the inflation data was released,
Richard Clarida, the Fed's vice chairman, reiterated this belief,
saying that "one-time increases in prices are likely to have only
transitory effects on underlying inflation" and that he expects
inflation to return to, or perhaps run somewhat above, the Fed's
longer-run goal in 2022 and 2023.
Some investors say continued consumer-price rises could pressure
the U.S. central bank.
"Should we witness a series of upside surprises to inflation,
like today's, then markets might begin to challenge the Fed's
narrative," said Rick Rieder, chief investment officer of global
fixed income at asset manager BlackRock, in a statement
The run-up in yields came before an auction of $41 billion of
10-year notes later in the afternoon. Analysts say the sale
attracted strong demand from investors.
Write to Sebastian Pellejero at email@example.com
(END) Dow Jones Newswires
May 12, 2021 16:16 ET (20:16 GMT)
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