Treasury Yields Tumble To November Lows After Weak Inflation Report

By Sunny Oh Markets MarketWatch Pulse

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 slumped 8.3 basis points to 2.131%. The 2-year note lost 6.5 basis points to 1.307%, while the 30-year bond, or the long bond, fell 5.1 basis points to 2.802%. 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.

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