Treasury yields climbed on Friday as underlying US consumer prices rose the most in 11 months in December, bolstering expectations of a pickup in domestic inflation and Federal Reserve interest rate hikes this year. The two-year yield, which is sensitive to traders' views on interest rates, rose to more than 2 percent for the first time since the financial crisis.
"This probably does heighten the chances of, at least incrementally, a move in March at the first meeting Powell will chair," said Lou Brien, market strategist at DRW Trading in Chicago, referring to incoming Federal Reserve Chair Jerome Powell. The US Senate Banking Committee will hold a second vote on January 17 on President Donald Trump's nomination of Powell to lead the central bank.
The US Labor Department said its Consumer Price Index, excluding the volatile food and energy components, rose 0.3 percent last month, amid strong gains in the cost of rental accommodations and healthcare. In the past year, inflation has remained stubbornly lower than the Fed's target rate of 2 percent, despite strong gross domestic product growth and employment data.
In a separate report on Friday, the US Commerce Department said retail sales rose in December and it revised sales growth in November higher, suggesting the economy exited 2017 with strong momentum. Next week's schedule for data releases is light, so the market will likely focus on Washington. As the continuing resolution expires Friday, investors will be watching Congress to see if it can put together a funding bill in time to avoid a government shutdown.
At 2:13 pm (1913 GMT), the yield on 10-year government notes was 2.554 percent, up from 2.531 percent at Thursday's close. The yield on two-year government bills hit a high of 2.026 percent, its highest since September 2008, before falling slightly to 2.002 percent at 2:13 pm EST.
Comments
Comments are closed for this article.