U.S. Treasury yields ticked higher Thursday after new U.S. data pointed to persistent wholesale inflation.
The 2-year Treasury yield climbed 4 basis points to 3.73%. The benchmark 10-year note yield added nearly 5 basis points to 4.285%.
One basis point is equal to 0.01%, and yields and prices move in opposite directions.
The producer price index, a measure of wholesale U.S. inflation, climbed 0.9% in July on a month-over-month basis. Economists polled by Dow Jones expected PPI to increase 0.2% month over month.
That report throws cold water on another inflation report that came out earlier in the week indicating some softening in consumer prices. The July consumer price index eased concerns that tariffs may be causing prices to increase rapidly.
Despite the higher inflation number, fed funds futures were still pricing in about 93% odds of a rate cut in September, according to the CME’s FedWatch Tool. This was only slightly lower from the day prior. The futures, however, did remove any chance of a half-point cut.
Those inflation readings come ahead of the Fed’s annual gathering of the world’s central bankers in Jackson Hole, Wyoming, from Aug. 21-23, sponsored by the Kansas City Fed, which will influence future monetary policy decisions.
“Next week the Kansas City Fed are hosting their annual economic policy symposium in Jackson Hole in Wyoming, which has historically often been used for the Fed to signal policy shifts,” Deutsche Bank analysts said in a note.
“It was last year that Chair Powell said that the ‘time has come for policy to adjust,’ just weeks before they cut rates for the first time since the pandemic. So all eyes will be on that conference for any fresh signals on the likelihood of rate cuts,” they added.
