The yield on the 10-year Treasury note surged on Tuesday after January inflation data came in stronger than expected.
The 10-year Treasury yield added 15 basis points to 4.32%, while the yield on the 2-year Treasury climbed 19 basis points to 4.664%. Yields and prices move in opposite directions, and one basis point equals 0.01%.
Treasurys
Consumer prices rose 0.3% in January from December, while the annual rate moved to 3.1%. Economists polled by Dow Jones had anticipated the key inflation gauge to increase 0.2% in January and 2.9% on an annualized basis.
Market participants have watched for any signs that inflation has cooled enough to allow the Federal Reserve to begin cutting interest rates. But Tuesday's data added to doubts that the central bank would be able to lower the cost of borrowing several times this year, which has been a centerpiece of equity market bullishness in recent months.
The next key level for the 10-year yield would be to hit between 4.35% to 4.36%, said Gregory Faranello, head of U.S. rates strategy at AmeriVet Securities.
"If we start breaking through that level, then I think it gets a little interesting," he told CNBC. "You could get some fast money accounts that try and lean into it a little bit and test people."
Other investors are even anticipating that the 10-year yield could move back above 5.00%, a level it last touched in October 2023.
"Bond yields have not peaked and we believe that a 10-year Treasury yield with a 5-handle is more likely than a 3-handle in 2024," said Skyler Weinand, chief investment officer at Regan Capital. "Persistent inflation, full employment and strong growth may delay the Fed's rate cuts."
Later in the week, January retail sales figures are slated for release on Thursday, while the January producer price index comes out on Friday.