Treasury yields rise as investors digest latest retail sales, inflation data

U.S. Treasury yields ticked higher on Wednesday after January's retail sales figure came in hotter than anticipated, just one day after the monthly consumer price index report also beat expectations.

The 10-year Treasury yield rose 4 basis points to 3.8%. The 2-year Treasury yield was less than one basis point higher at 4.625%. The yield on the 2-year Treasury hit 5.021%, its highest level since July 2007.

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


On Wednesday, January retail sales report showed a 3% increase on the month, much stronger than economists expected. That signals that consumers are still spending even amid stubborn inflation. While that's good news about the strength of the economy, it could also mean that the Federal Reserve will keep hiking interest rates and hold them higher for longer to tame price increases.

On Tuesday, the latest reading of the consumer price index, which tracks price changes for a range of goods and services, came in higher than expected and showed that inflation rose by 0.5% in January. The CPI increased by 6.4% from a year ago.

According to a Dow Jones survey, economists had previously expected the figures to rise by 0.4% on a monthly basis and 6.2% annually.

Speaking at the New York Bank Association after the release of the CPI report, New York Fed President John Williams suggested that the Fed's battle with inflation was not yet over. Meanwhile, in a speech at  Prairie View A&M University in Texas, Dallas Fed President Lorie Logan indicated that further interest rate hikes are on the cards.

The Fed has been hiking interest rates in an effort to cool the economy and ease inflation. Many investors are concerned about whether elevated rates could cause the U.S. economy to contract and are hoping that the central bank will pause rate hikes this year.

Investors will be awaiting the release of the producer price index report, as well as fresh comments from Fed officials on Thursday.