Treasury prices early Wednesday rallied, pushing yields down dramatically, after tepid inflation data suggested that the Federal Reserve may need to adopt a more gradual pace of monetary tightening. The yield for the benchmark 10-year note [BX:TMUBMUSD10Y] slumped 5.8 basis points to 2.154%. The 2-year note [BX:TMUBMUSD02Y] lost 6.5 basis points to 1.311%, while the 30-year bond, or the long bond, [BX:TMUBMUSD30Y] fell 5.1 basis points to 2.820%. Bond yields and prices move inversely. The consumer-price index declined by 0.1% in May, the second drop in three months, while the core index only grew by 0.1%. Investors have closely eyed the CPI data as it could inform the Fed’s thinking on how fast it should raise rates. Lower inflation is bullish for bonds, because a rise in inflation can erode a bonds value. Fed officials had previously described the tepid inflation data as “transitory” to set up for June’s rate hike, but a continued decline in inflation could push back the central bank’s schedule to reduce its balance sheet. The Fed is set to deliver its updated policy decision later Wednesday at 2 p.m. Eastern, with a news conference slated for half-hour later led by Janet Yellen. Wall Street had widely expected a quarter-point rate hike by the central bank.
Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news.
From:: Stock Market News