TREASURIES-U.S. 10-year Treasury yield drops to one-month low ahead of CPI data

BY Reuters | ECONOMIC | 05/15/24 05:38 AM EDT

LONDON, May 15 (Reuters) - The benchmark 10-year U.S. Treasury yield dropped to its lowest in a month on Wednesday ahead of the release of closely watched U.S. inflation data.

The 10-year Treasury yield dropped to as low as 4.418%, its lowest since April 10, and was last down 2 basis points at 4.424%.

It has dropped sharply since reaching 4.739% in late April, a five-month high, but remains well above its level at the start of the year.

U.S. consumer price data is due at 1230 GMT and will drive near-term Federal Reserve policy, and hence Treasuries. It comes after three hotter-than-expected readings so far this year.

Economists polled by Reuters expect core CPI to rise by 0.3% in the month, down from 0.4% in March, for an annual gain of 3.6%, down from 3.8%.

The fall in U.S. yields for the third session in a row came as traders digested remarks Tuesday from Federal Reserve chair Jerome Powell that he expects U.S. inflation to continue declining through 2024 as it did last year, though his confidence in that has fallen due to the first quarter data.

Also in the mix Tuesday was data showing U.S. producer prices increased more than expected in April, though March's figure was revised downwards.

The U.S. two-year yield was down 1.5 basis points at 4.80%. (Reporting by Alun John Editing by Bernadette Baum)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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