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Markets

Treasury yields up for 6th day, expect 5%-plus inflation

  • US 30-year yields also rose a touch, trading at 2.01% after scaling the 2% level on Tuesday for the first time since mid-July
11 Aug, 2021

US Treasury yields were up for a sixth straight session on Wednesday, awaiting crucial inflation data that may provide further clues on when the Federal Reserve can start winding down its bond buying.

US consumer prices are expected to have risen 5.3% year-on-year in July, according to a Reuters poll, slightly below last month's 5.4%. The data will follow comments by two US Federal Reserve officials that inflation is already at levels that satisfy one leg of a key test for tightening policy.

Fed rate-setters' comments alongside better-than-expected US jobs data last Friday, halted the sharp fall in yields seen in July and the start of August.

US Treasury yields edge up

Ten-year Treasury yields were up three basis points by 0850 GMT to 1.376%, the highest since mid-July. That puts them 25 bps above six-month lows at 1.127% touched last week.

They are already up more than 6 basis points this week and set for the biggest two-week rising streak since mid-March, when the reflation trade was at its height.

"It can be a bit nasty on the Treasury market if there is a high (inflation) number - because those that believe that the recent boost to inflation is not transitory will get extra 'ammunition'," said Jens Peter Sorensen, chief analyst at Danske Bank.

Additional spending mooted by President Joe Biden's infrastructure plans could further complicate the inflation outlook, Sorensen added.

The US Senate on Tuesday passed a massive infrastructure bill and kicked off debate on a further $3.5 trillion spending blueprint for climate change, universal preschool and affordable housing.

US 30-year yields also rose a touch, trading at 2.01% after scaling the 2% level on Tuesday for the first time since mid-July.

The gap between two and 10-year yields -- the so-called yield curve which is considered a reliable gauge of the growth outlook -- was at 112 bps, the steepest since mid-July.

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