Market News

By Naomi Tajitsu

Treasuries edged higher after their biggest selloff since December as investors awaited the latest inflation snapshot for clues on the path of U.S. interest rates following Wednesday’s hotter-than-expected print.

The yield on 10-year notes slipped two basis points to 4.60% after surging as much as 12 basis points in the previous session, the sharpest increase since Dec. 18. The rate on two-year notes was down three basis points, retreating from its highest level in nearly a month.

The surprise acceleration in consumer price growth battered US government bonds and traders pushed bets for the next Federal Reserve interest-rate cut to December as the data added to concern about the impact of U.S. trade tariffs.

Now, markets are focusing on producer-price inflation figures due later Thursday and an auction of 30-year government bonds to gauge whether yesterday’s recalibration was justified.

“Pricing out some of the cuts that we were expecting to see over the course of the year makes sense,” said Henrietta Pacquement, senior portfolio manager at Allspring Global Investments. “The U.S. has got the uncertainty due to the administration and where they are heading next, which is feeding to prices.”

Before Wednesday’s report, traders were leaning toward two interest-rate cuts from the Fed. Those bets were cut back after the print to show just one quarter-point reduction this year.

Still, Thursday’s tentative recovery could pick up if the industrial price-growth gauge shows signs of steadying, according to Elias Haddad, senior strategist at Brown Brothers Harriman.

“A further cooling in core services PPI inflation today would mitigate concerns of resurging price pressures,” Haddad said. That could “lead US rate expectations to reprice bets for 50 basis points of easing in 2025,” he said.

Investors will also be watching a $25 billion auction of 30-year bonds later Thursday. A sale of 10-year notes yesterday produced the highest new-issue coupon since 2007.