Bonds

Treasury yields climb, with focus on hawkish Fed comments and economic data

U.S. Treasury yields climbed on Friday morning, as investors remained focused on hawkish comments from Federal Reserve officials.

The yield on the benchmark 10-year Treasury note jumped more than 7 basis points to 1.784% in afternoon trading. The yield on the 30-year Treasury bond moved up a similar amount to 2.126%. Yields move inversely to prices and 1 basis point is equal to 0.01%.

Yields have spiked since the beginning of year, amid concerns around the Fed tightening monetary policy. The jump on Friday erased much of the modest decline from earlier in the week after the 10-year yield briefly topped 1.8% on Monday.

On the data front, December's retail sales data came in worse than expected on Friday, showing a decline of 1.9%. Economists surveyed by Dow Jones had penciled in a decline of just 0.1%.

Industrial production data for December and the the University of Michigan preliminary consumer sentiment index for January both came in lower than expected. In the report, consumers said they expected inflation to be 3.1% over the next five years.

Treasurys


The benchmark 10-year yield was little changed for the week, despite hawkish commentary from Fed officials and economic data that showed slower growth and high inflation. Chris Hussey from Goldman Sachs said in a note that that relative calm in U.S. bonds could be a combination of the economic results being priced in and attractiveness relative to foreign sovereign bonds, where yields are minimal or even negative.

"While there may be scope in the US for 10-year rates to move higher, every time they do, bond investors overseas are likely attracted," Hussey said.

Friday wraps up a busy week of commentary from Fed officials, including Chair Jerome Powell's testimony to the Senate as part of his confirmation process. On Thursday, Philadelphia Fed President Patrick Harker told CNBC's "Closing Bell" that he believed that interest rates could be hiked three or four times this year. Chicago Fed President Charles Evans said he saw three interest rates as most likely this year, but was also open to more.

Peter Toogood, chief investment officer at Embark Group, told CNBC's "Squawk Box Europe" on Friday that the Fed was "now just being realistic" with its more hawkish comments amid rising pricing pressures.

He said that Fed was "probably trying to talk down bonds, as opposed to necessarily taking the action required and then probably hoping that open-mouth operations can be helpful to stop the very steep curve."

These developments have come as inflation data showed historically high jumps in prices. The December producer price index, released on Thursday morning, rose 0.2% month on month, though this was slightly below economists' forecast of a 0.4% increase.

The December consumer price index, which came out on Wednesday, showed a 7% jump year on year. This represented the fastest increase over a 12-month period since 1982.

There are no auctions scheduled to be held on Friday.

CNBC's Jeff Cox and Pippa Stevens contributed to this market report.