US Treasury yields continued their upward trend on Tuesday, as investors awaited inflation data. The 10-year yield rose by one basis point to 4.4306%, while the two-year yield, which is sensitive to interest rate policies, increased to 3.9705%, and the 30-year yield surpassed the 5% mark.
Markets are now focused on the April Consumer Price Index (CPI) report, with forecasts predicting a jump in annual inflation to 3.7%, its highest level since September 2023. This acceleration is primarily attributed to the energy price shock stemming from the ongoing conflict in the Middle East, which pushed West Texas Intermediate crude futures up 2.5% to above $100 a barrel. Core inflation, which excludes food and energy, is also expected to rise to 2.7%.
This surge in inflation adds to the challenges facing the incoming Federal Reserve Chair, Kevin Warsh, who will lead the Federal Open Market Committee amid its deepest divisions in over 30 years, with interest rates remaining steady between 3.5% and 3.75% since December. Meanwhile, ADBish data indicated a slight slowdown in the pace of private-sector hiring, averaging 39,250 jobs per week.
