Short-term US Treasury yields rose on Friday after raising concerns over a possible slowdown following the release of warmer-than-expected inflation data.
The 2-year rate rose by more than 17 basis points to 3%, reaching its highest level since June 2008. The benchmark 10-year Treasury yield also rose, up about 3.14% in previous trade. Short-term rates moved higher because of their high sensitivity to Federal Reserve rate hikes.
The US Consumer Price Index, a closely watched inflation gauge, May grew by 8.6% on a year-on-year basisThe Bureau of Labor Statistics reported Friday that it had the fastest growth since 1981. Economists polled by Dow Jones were expecting a gain of 8.3%.
The so-called core CPI, which separates volatile food and energy prices, rose 6%. This is also higher than the estimate of 5.9%.
“There is much to the idea that inflation is peaking,” said Greg McBride, chief financial analyst at Bankrate. “Any expectation that the Fed can reduce the pace of rate hikes after its June and July meetings now appears to be a long way off. Inflation is rearing its ugly head and recovery hopes dashed again. are gone.”
Inflation has been rising throughout the year, forcing the Fed to raise rates to ease those pricing pressures.
The Fed began raising rates in March and implemented a 50-basis-point hike in May, the largest in 22 years, along with the minutes of the Federal Open Market Committee meeting. pointing to further aggressive growth,