Ten-year Treasury yields are falling as traders digest the drop in wholesale prices

Ten-year Treasury yields fell again on Friday after data released this week suggested inflation was easing.

The 10-year treasury Yields were trading around 4.209%, down about 3 basis points. The 2 year treasury Banknote yields were marginally higher at 4.694%.

Yields and prices move in opposite directions and one basis point equals 0.01%.

The moves come after the producer price index, a measure of wholesale inflation, fell 0.2% in May, below economists' expectations of a 0.1% rise and a 0.5% increase in April. The data was released Thursday.

“Both headline and core inflation in the US were significantly lower than expected, reinforcing the view that inflationary pressures are finally starting to ease,” Rabobank researchers said in a note on Friday.

The figures joined other data releases this week, with weekly initial jobless claims hitting a 10-month high and consumer prices for May remaining flat – 0.1 percentage point below expectations.

Deutsche Bank analysts said Friday that the data had combined to make investors more confident about the prospect of rate cuts by the U.S. Federal Reserve.

“Given these numbers, investors have raised the prospect of Fed rate cuts, and the amount priced at the December meeting rose +6.2 basis points to 50 basis points on the day,” said the analysts, led by Henry Allen, in a report. remark. 'That in turn led to another rally for US government bonds [on Thursday]which was further boosted later in the session by a strong 30-year auction, with the highest bid-to-cover ratio in twelve months.”

The Fed opted on Wednesday to keep interest rates stable at 5.25% to 5.50% and indicated there would be only one cut this year.

— Jeff Cox contributed to this report.

Correction: An earlier version incorrectly reflected the size of the decline in ten-year government bond yields.

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