U.S. Treasury yields continued to climb higher on Wednesday as investors digested the previous session’s dramatic market route triggered by a hot inflation reading.
The yield on the 2-year Treasury, the part of the curve most sensitive to Fed policy, was trading 4 basis point higher at around 7:30 a.m. ET to reach 3.801%. At one point the 2-year yielded as high as 3.805%, its highest level since November 2007. Tuesday’s session saw it surge 17 points.
Yields move inversely to prices, and a basis point is equal to 0.01%.
Meanwhile, the yield on the benchmark 10-year Treasury note was up just over 3 basis points, trading at 3.455%. The yield on the 30-year Treasury bond was up 2 basis points at 3.528%.
August’s consumer price index report saw inflation rise 0.1% month on month. Markets had been expecting a lower reading due to a fall in gas prices, which dropped 10.6% from the previous month. A further 75 basis point rate hike from the Fed is being priced in by markets, but there is some anticipation that the next rate increase could be even higher.
Some traders are now expecting a full point rate hike from the U.S. Federal Reserve at its September meeting, according to the CME FedWatch tracker of Fed funds futures bets. Economists at Nomura now also expect to see a full percentage hike.
President Joe Biden, asked during a press pool Tuesday if he was worried about the inflation numbers, replied, “No, I’m not, because we’re talking about one tenth of 1 percent.”
“The stock market doesn’t necessarily reflect the state of the economy, as you well know,” Biden also said. “And the economy is still strong. Unemployment is low. Jobs are up. Manufacturing is good… I think we’re going to be fine.”
The mortgage market index and data on mortgage applications is due Wednesday, as well as crude oil and gasoline stocks data and the core monthly and year-on-year producer price index for August.
— CNBC’s Abigail Ng contributed to this report.