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U.S. Treasury yields fall as investors weigh state of economy

U.S. Treasury yields declined on Friday as investors considered the state of the economy after the release of inflation data and weighed the path ahead for interest rates.

At 4 p.m. ET, the yield on the 10-year Treasury was down more than 5 basis points at 4.52%. The 2-year Treasury yield was last at 4.894% after falling 6 basis points.

The Treasury yields were still up sharply for the week despite Friday’s decline. The benchmark 10-year was up more than 10 basis points during that time, while the 2-year has risen more than 15 basis points.

Yields and prices have an inverted relationship. One basis point is equivalent to 0.01%.

Investors considered the state of the economy after key economic data releases, and assessed what this could mean for upcoming monetary policy decisions from the Federal Reserve.

Import prices in the start of 2024 posted their largest three-month gain since May 2022, according to new data from the Labor Department. Boosted by a 4.7% jump in fuel, import prices rose 0.4% in March, higher than the 0.3% Dow Jones estimate. On a 12-month basis, import prices rose 0.4%, the first increase since January 2023.

The March producer price index, which tracks wholesale inflation, came in below expectations on Thursday, reflecting a 0.2% increase from the previous month. Economists polled by Dow Jones had been expecting it to rise 0.3%.

The reading eased concerns about persistent inflationary pressures slightly. Investors have been fretting about what sticky inflation could mean for interest rate cuts that are expected to take place later this year.

Market expectations for when the first rate cut will take place shifted from June to September in recent days after the March consumer price index came in higher than expected earlier this week. Some investors are also considering the possibility of there being no rate cuts at all this year.

The Fed has frequently said its decision-making on rate cuts will be data-led, and that it is waiting for inflation to move lower before easing monetary policy.

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