Treasury yields rose on Tuesday as investors digested the latest consumer price index report and assessed the Federal Reserve's tightening path.
The 10-year Treasury yield rose 3.4 basis points to 3.753%. The yield on the 2-year Treasury climbed 8.1 basis points to 4.613%. The yield on the 6-month Treasury surged to close at 5.022%, a level it hasn't closed at or above since July 2007.
Yields and prices have an inverted relationship. One basis point equals 0.01%.
Treasurys
The consumer price index, which measures a broad basket of common goods and services, rose 0.5% for the month, which translated to an annual gain of 6.4%. Economists surveyed by Dow Jones had been looking for respective increases of 0.4% and 6.2%.
Excluding volatile food and energy, core CPI increased 0.4% monthly and 5.6% from a year ago, against respective estimates of 0.3% and 5.5%.
"It was a fairly as-expected print that underwhelmed the 'whisper' of a stronger core read, but the still-high outright level of inflation combined with the state of the labor market should add credence to the ongoing tightening (and no 2023 cuts) narrative," BMO's Ben Jeffery said in a note.
The most recent CPI report released in December noted a 0.1% decline, the largest decrease since 2020. Many investors took this as an indication that the Fed's efforts to cool the economy and ease inflation were taking effect.
These measures have included eight interest rate hikes since March 2022. Many investors have been concerned about the pace of rate hikes, and the prospect of rates remaining elevated for longer as they fear this will cause the U.S. economy to contract.
A series of Fed officials have indicated that future rate decisions will depend on economic data. Central bank officials are due to make remarks on Tuesday, which investors will be scanning for fresh hints about the Fed's monetary policy and expectations for the economy.