Traders work on the floor of the New York Stock Exchange (NYSE) in New York, US, on Thursday, Jan. 11, 2024. Bitcoin surged past $49,000 for the first time since December 2021 with trading commencing on the first US exchange-traded funds that invest directly in the biggest cryptocurrency. Photographer: Michael Nagle/Bloomberg via Getty Images
Treasury yields declined on Friday as investors digested the latest U.S. inflation reading and whether interest rates will fall as soon as March.
The yield on the 10-year Treasury note ticked lower by about 3 basis points to 3.946%. It has been hovering around the 4% mark for much of the week. The 2-year Treasury yield declined nearly 11 basis points to trade at 4.155%.
Yields and prices move in opposite directions. One basis point equals 0.01%.
Data released earlier Friday reflected an unexpected decline in wholesale prices in December, giving investors an optimistic signal for inflation. The producer price index fell 0.1% for the month and ended 2023 up 1% from a year ago, the Labor Department reported Friday, while economists surveyed by Dow Jones had been looking for a monthly gain of 0.1%. Excluding food and energy, core PPI was flat against the estimate for a 0.2% increase.
This data follows the more widely followed consumer prices data released on Thursday, which indicated that prices went up 0.3% on the month and 3.4% from a year ago. Economists had expected a 0.2% reading amid an easing of inflationary pressures.
Core inflation, which excludes volatile food and energy prices, meanwhile, was roughly in line with expectations.
"The underlying inflation trend is improving and the Fed can legitimately consider cutting rates this year," said LPL chief economist Jeffrey Roach. "The inflation pipeline is clearing and consumer prices will gradually get to the Fed's 2% target. Investors must be patient during the slow-moving disinflationary process."
Money Report
Many investors were hoping the Federal Reserve would cut rates more than expected this year, with the first reductions as early as March, although the latest figures have called this into question. Markets were last pricing in a roughly 68% chance of the first rate cut taking place then, according to the CME FedWatch Tool.
— CNBC's Jeff Cox contributed to this report.
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