Treasury yields fall as traders look ahead to key inflation data

U.S. Treasury yields declined on Wednesday as traders readied for key economic data coming later this week that could provide fresh insights into the state of the U.S. economy.

The 10-year Treasury was trading at around 3.535% after falling by just over 8 basis points. The yield on the 2-year Treasury was last down by 4 basis points to 4.218%.

Yields and prices have an inverted relationship. One basis point is equivalent to 0.01%.


Investors weighed the outlook for inflation and how it could affect future Federal Reserve monetary policy ahead of the release of December's consumer price index on Thursday.

In recent weeks, Fed officials have suggested that fresh inflation data could affect policy decisions at their next meeting on Jan. 31 and Feb 1. Investors are fretting over whether the central bank will increase interest rates by 25 or 50 basis points then and will therefore be scanning the fresh CPI reading for clues.

The Fed implemented a 50 basis point rate hike at its December meeting, a slight decline from the 75 basis point increases it announced at its previous four meetings. Concerns that the pace of rate increases would lead the U.S. economy into a recession have spread.

Investors are also hoping for hints about the broader state of the U.S. economy on Friday, when the preliminary Michigan Consumer Sentiment for January is released. The report focuses on how consumers view the outlook for the economy and their personal financial circumstances.

No major data releases are slated for Wednesday.