Treasury yields increase after producer prices are a touch hotter than expected

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U.S. Treasury yields rose on Friday as traders assessed a slightly higher-than-expected measure of wholesale inflation.


The yield on the benchmark 10-year Treasury note added nearly 8 basis points to 4.16%, while the yield on the 2-year Treasury note ticked up more than 7 basis points to 4.895%.

The producer price index rose 0.3% for July, the Bureau of Labor Statistics reported Friday. That came in slightly ahead of the 0.2% month-over-month increase expected by economists polled by Dow Jones.

The report follows Thursday's consumer price index, which indicated that prices rose by 3.2% year-on-year in July, slightly below the 3.3% consensus forecast among economists polled by Dow Jones. However, the core CPI reading, which excludes volatile food and energy prices, increased by an annual 4.7%.

Tiffany Wilding, managing director and economist at Pimco, said the Thursday data would be welcomed by the Federal Reserve. Traders are closely watching several key data points to gauge whether the central bank will need to hike interest rates again in September and for how long monetary policy will stay tight.

"After inflation was stubbornly firm in the first part of the year, the U.S. economy continues to look on track for meaningful disinflation in the second half of the year," Wilding said.

"We continue to expect core CPI to end the year around 3.3% y/y. Still, we think Fed officials are likely to remain in data dependence mode for now, and will wait for further evidence of the economy slowing before declaring victory."