MSCI’s benchmark, the S&P 500 and a key European index surged to record highs after the U.S. Labor Department said the consumer price index in the 12 months ended in May accelerated 5.0%, the biggest year-on-year increase since August 2008.
In a sign of market complacency, the 10-year U.S. Treasury note’s yield fell 1.2 basis points to 1.4772% after earlier rising above 1.5% following the data’s release.
On Wall Street, the Dow Jones Industrial Average rose 0.35%, the S&P 500 gained 0.45% and the Nasdaq Composite added 0.49%.
A surprisingly strong U.S. inflation print in April spooked investors, sparking a cautious run into Thursday’s of May data.
Short positions in Treasuries were the highest since 2018, according to JP Morgan positioning data last week.
Subadra Rajappa, ” Rajappa, Joseph LaVorgna, ” LaVorgna, “, ”, MSCI’sOrganizations:U.S . Labor Department, Treasury, Societe Generale, Americas, Dow Jones, Nasdaq, European Central Bank, MorganLocations:New York, Natixis, U.S, Treasuries
The benchmark 10-year yield was up 2.7 basis points at 1.5161% in morning trading and had reached as high as 1.535%.
The increase in the 10-year yield broke a pattern of declines in recent days but left the note still below its range of last week.
The trading pushed up the part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations.
It was at 136 basis points, about 2 basis points higher than Wednesday's close.
The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was up less than a basis point at 0.1568%.
Ross Kerber, steepening, Subadra Rajappa, Chizu NomiyamaOrganizations:Traders, Treasury, U.S . Labor Department, U.S . Federal Reserve, Societe Generale, U.SLocations:U.S, New York, Boston
Nerves had increased over the seven-year auction after the maturity drew weak demand at auctions in February and March.
“The seven-year auction was widely anticipated just because of the bad previous two auctions, so it was nice to see it make somewhat of a comeback,” said Eric Souza, senior portfolio manager at SVB Asset Management.
Seven-year yields gained four basis points to 1.300% after earlier reaching 1.309%, the highest since April 15.
Benchmark 10-year note yields rose five basis points to 1.618%, the highest since April 20.
Analysts expect the Fed will hike the IOER if the fed funds rate falls below five basis points.
Karen Brettell, “, ”, Eric Souza, Subadra Rajappa, Souza, Kirsten Donovan, David GregorioOrganizations:Treasury, Treasury Department, Federal, SVB Asset Management, Dealers, Gross, Societe Generale, ”Locations:COVID, New York, U.S
Not sure the Fed can do more to support the economy: Subadra RajappaSubdara Rajappa, head of U.S. rates strategy at Soc-Gen, joins 'The Exchange' to talk about the real concern of the Fed before the meeting.