Treasury yield falls as market reassesses inflation risk

The Treasury bond U.S. dollars rose on Tuesday and benchmark 10-year note yields fell from a three-year high as the market paused to reassess the inflation outlook a day before key consumer price data is released.

The 10-year paper yield fell 11.4 basis points to 2,965%, while the 30-year debt lost 10.8 basis points to 3,100%, trading almost below 3 percent.

The aggressive turnaround effected in March by the Federal Reserve to contain inflation, he promoted the liquidation of bonds. However, when the 10-year yield hit 3,203% on Monday, just a few basis points off a near-decade high marked in 2018, that triggered a reversal, said George Goncalves of MUFG Securities.

“It’s a recalibration of risk. There’s no other catalyst, other than it’s gone too far, too fast,” he said.

The US Consumer Price Index is expected to show that the core CPI slowed last month to 6% and the headline CPI to 8.1%, from 6.5% and 8.5%, respectively, in March.

The Treasury will auction $45 billion of three-year bonds today, followed by $36 billion of 10-year notes on Wednesday and $22 billion of 30-year notes on Thursday.

A closely watched part of the bond yield curve, which measures the spread between the return on two-year and 10-year notes, narrowed to 38.1 basis points.

Two-year bond yields, which typically move in step with rate expectations, fell 3.6 basis points to 2,584 percent.

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