US Treasury yields fall after tame inflation data

  • Consumer prices rose 0.2 percent in February, matching Wall Street expectations and keeping fears of runaway inflation at bay.
  • Yields also came under pressure after President Donald Trump announced that he ousted Rex Tillerson as Secretary of State.

U.S. government debt yields were lower Tuesday after consumer pricing data met Wall Street expectations.

The yield on the benchmark 10-year Treasury note was lower at 2.837 percent at 3:41 p.m. ET, while the yield on the 30-year Treasury bond was lower at 3.096 percent. Bond yields move inversely to prices.

Consumer prices rose 0.2 percent in February, matching Wall Street expectations and keeping fears of runaway inflation at bay. On a year-over-year basis, the consumer price index rose 2.2 percent, a bit ahead of the 2.1 percent increase reported in January.

Core CPI — which excludes volatile food and energy prices — was up 0.2 percent for the month and 1.8 percent annualized. The latest reading comes a month after the CPI posted its largest gain in four years of 0.5 percent, sparking fears of rising prices and a more aggressive Federal Reserve.

US 10-year Treasury note yield 5-day chart

Source: FactSet

Yields also came under pressure after President Donald Trump announced that he ousted Rex Tillerson as Secretary of State. The president tweeted that CIA Director Mike Pompeo will replace Tillerson as the nation's top diplomat amid sensitive negotiations with North Korea.

"Tillerson's departure is eclipsing the CPI release this morning and helping drive a rally led by the 7-year part of the Treasury curve," said Aaron Kohli, fixed income strategist at BMO. "The market is trading the headline more on the fact that it suggests continued turmoil within the White House rather than anything specific to Tillerson's tenure."

As for the CPI data, Kohli added it "was certainly enough to keep the FOMC on track and we're likely to see some further pressure on [five-year notes] if the Fed sounds aggressive next week."

Symbol
Yield
 
Change
%Change
US 3-MO
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US 1-YR
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US 2-YR
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US 5-YR
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US 10-YR
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US 30-YR
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Last week, President Trump signed two declarations which would implement tariffs on steel and aluminum imports.

The tariffs are expected to take effect in the coming weeks and will see a 25 percent charge placed on steel, and 10 percent levy on aluminum — Canada and Mexico, however, are exempt. Investors remain concerned that countries around the world may strike back because of the tariffs.

The Treasury Department auctioned $13 billion in 30-year bonds at a high yield of 3.109 percent. The bid-to-cover ratio, an indicator of demand, was 2.38 Indirect bidders, which include major central banks, were awarded 57.9 percent. Direct bidders, which includes domestic money managers, bought 14.8 percent.