Treasury yields climb after wholesale prices rise faster than expected

Treasury yields climbed on Friday after November's producer price index showed hotter-than-expected inflation.

The benchmark 10-year Treasury yield was up about 10 basis points at 3.595%. The 2-year yield rose more than 3 basis points to 4.346%.

Yields and prices have an inverted relationship and one basis point equals 0.01%.


Wholesale prices rose 0.3% in November, above the 0.2% expected by economists, according to Dow Jones. Core inflation also topped expectations. Yields were broadly lower in early trading but reversed course after the PPI release.

Concerns about a looming recession and the Federal Reserve's interest rate plans have been mounting in recent weeks. Several economic data releases had suggested that rates may have to be hiked further and stay elevated for longer to lower persistently high inflation.

Many have been hoping for the Fed to pause, or significantly slow, the pace of rate hikes as they believe the U.S. economy will otherwise be dragged into a recession. The inverted yield curve, which many traders view as a precursor to a recession, could be signaling that.

"We're in inversion territory," said Matt Stucky, senior portfolio manager at Northwestern Mutual Wealth Management. "What that tells me is that we're very late into the hiking cycle and when you see this measurement invert, we're not too far away from the end when it comes to Fed hikes, as well as the strong potential for a recession."

The central bank has increased rates by 75 basis points at each of its last four meetings. It is next due to meet on Dec. 13-14. Investors are widely expecting the Fed to implement a 50 basis point rate hike then and are hoping officials will provide new insights into the outlook for the U.S. economy and monetary policy.