NEW YORK: US Treasury prices tumbled and short- and intermediate-dated yields reached their highest levels in over a decade on Friday after data showed that US consumer prices soared in May.
The consumer price index increased 1.0% last month after gaining 0.3% in April, as gasoline prices hit a record high and the cost of food jumped.
“It’s tough to find any solace in this inflation report,” said Gennadiy Goldberg, a senior rates strategist at TD Securities in New York.
“The fact that we continue to see strong inflation prints is going to keep the Fed thinking that more 50 basis points hikes could be on the cards,” Goldberg said.
Two-year yields, which are highly sensitive to interest rate hikes, spiked to 3.007%, the highest since June 2008. Benchmark 10-year yields reached 3.152%, the highest since May 9. Three-year yields also jumped to their highest levels since Dec. 2007 and five-year yields were the highest since Sept. 2008 as traders priced in more aggressive rate hikes by the Federal Reserve and a higher terminal rate.
The US central bank is expected to hike rates by 50 basis points when it meets next week, with a further 50 basis point increase priced in for July and a strong chance of a similar move in September.
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