Why Treasury Yields Just Fell the Most Since August | Global News Avenue

U.S. Treasury yields plunged on Wednesday as market participants breathed a sigh of relief after consumer inflation data for December showed no surprises.

The 10-year Treasury yield fell about 14% base point On Wednesday afternoon, it was the biggest intraday drop since August.

inflation checked in December, as economists and Wall Street expected. core inflationwhich excludes food and energy prices and is represented by Fed Price pressures, a more reliable measure of price pressures, slowed last month to their lowest level since July.

Market participants have become increasingly agitated in recent weeks strong economic data That will prevent the Fed from cutting rates this year nearly as much as they once expected. Some are even nervous that officials may need to change course and raise rates again to get inflation back to Fed levels. 2% target.

New inflation data favors another rate cut

Wednesday’s inflation report reassures investors that the Fed will lower its benchmark interest rate federal funds rate Sometime this year. The probability of at least a quarter-point rate cut by the middle of this year rose to 64% from 57% on Tuesday, according to federal funds futures trading data. The probability of no rate cut this year fell from nearly 26% to less than 17%.

A string of strong economic reports and the impending inauguration of President-elect Donald Trump — some economists are sounding the alarm about his tax, immigration and tariff policies May revive inflation— leading to a relatively steady climb in yields in recent months. 10 years since mid-September Treasury yieldInterest rates, which affect rates on a range of business and consumer loans, have risen by more than 1 percentage point, while the Federal Reserve has cut them by the same amount.

Yields rise Suppress the stock market. As of Wednesday, the S&P 500 was down about 3% from its all-time high set in early December. higher Rate It hurts stocks by raising corporate borrowing costs, eroding corporate profits and diverting capital from stocks to bonds. Stocks rose on Wednesday, with the S&P 500 on track for its best day since November.

U.S. Treasury yields also raise interest rates for consumers, including potential homebuyers. Mortgage interest rates are climb higher Since September, the historically expensive housing market has become even more unaffordable.