Short-term yields dip, 10-year Treasury yield pops after another report shows easing inflation

Short-term Treasury yields slipped on Thursday and the yield curve steepened as market participants digested another economic report that showed a slowdown in inflation.

The three-month yield fell 4 basis points to 2.553%. The 2-year Treasury yield was up over 2 basis points at 3.239%, following a sharp decline in the previous session. Yields move inversely to prices, and a basis point is equal to 0.01%.

Meanwhile, the yield on the benchmark 10-year Treasury note rose 11 basis points to 2.891%. The yield on the 30-year Treasury bond was up more than 13 basis points to 3.175%.

The moves helped to ease inversions along the yield curve, which are seen as recession signals by Wall Street.

The action in the bond market followed data showing wholesale prices falling in July for the first time in two years.

The producer price index, which gauges the prices received for final demand products, fell 0.5% from June, the first month-over-month decrease since April 2020, the month after Covid-19 was declared a pandemic. Economists surveyed by Dow Jones had been expecting an increase of 0.2%.

“This data point too, points to the peak in inflation that we’ve been talking about here for a few months,” Peter Boockvar, CIO of Bleakley Financial Group, said in a note. “The question again then is to what extent does it moderate from here and how quickly.”

The PPI marked a second report this week pointing to easing price pressures. Data on Wednesday showed that U.S. consumer prices rose 8.5% year over year in July, slowing from the previous month in large part due to a drop in oil prices. Economists had expected an 8.7% annual climb.

The easing of inflation made investors question the prospects for the Federal Reserve to slow the pace of rate hikes as soon as September.

— CNBC’s Elliot Smith contributed to this report.