2-year Treasury Note On Pace For Sharpest Daily Yield Drop Since Brexit

The 2-year Treasury yield tumbled 7.7 basis points to 1.290%, putting it on track for the largest one-day fall in yields since June 24, 2016, the day after the U.K. voted to exit from the European Union, according to WSJ Market Data Group. The 2-year Treasury note, which is especially sensitive to shifts in expectations for Federal Reserve interest-rate policy, headlined a broad rally in U.S. government bonds, pushing yields to their lowest levels since November, after a batch of inflation reports suggested that inflation may not be on pace to rise to the Fed's target 2% rate. Consumer-price inflation, or cost of living, slowed to 1.9% in May from 2.2% in April, while the core index, which strips out volatile energy and food prices, rose 0.1% in May. Compared with a year ago, core CPI was up 1.7%, the lowest in 2 years. Retail sales fell 0.3% in May, the weakest in 16 months. Lower inflation is bullish for bonds, because a rise in inflation can erode the value of bond's fixed interest payments. Yields on the 10-year and the 30-year Treasury bond were on track to fall the most in about a month. The yield moves come as the Fed is slated to deliver its updated policy statement, with expectations that the central bank will lift interest-rates by a quarter-point. The day after so-called Brexit, the two-year yield plunged 12.9 basis points. Bond trading action also comes after House Majority Whip Steve Scalise and others were shot Wednesday morning during a baseball-team practice for Republican members of Congress in Northern Virginia.

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