10-year Treasury yield spikes above 4.3% after hot producer prices report

U.S. Treasury yields climbed on Friday after January wholesaler prices came in higher than expected.

The yield on the 10-year Treasury was 6 basis points higher to 4.295%, just under the closely watched 4.3% level.

The 2-year Treasury yield was last trading at 4.66% after rising by 9 basis points. At one point, the yield reached 4.718%, its highest level since Dec. 13.

Yields and prices have an inverted relationship. One basis point equals 0.01%.

The producer price index rose 0.3% in January, above the 0.1% forecast from economists surveyed by Dow Jones. Excluding volatile food and energy prices, the so-called core PPI added 0.5%, also exceeding expectations for a 0.1% increase. 

It’s the latest in a string of closely watched economic data releases this week that have come as investors attempt to predict the future of inflation and monetary policy.

Earlier in the week, the consumer price index for January showed a 0.3% increase on a monthly and a 3.1% rise on an annual basis, just above expectations. Markets took a sharp slide after the data indicated persistent inflation.

Data published on Thursday showed that retail sales figures fell by 0.8%, which was far more than expected in January. Economists previously surveyed by Dow Jones had expected a 0.3% decrease.

Meanwhile, the latest initial weekly jobless claims — also released Thursday — suggested continued strength in the labor market, coming in at 212,000 down from an upwardly revised 220,000 in the previous period.

Investors have been closely watching economic data for hints about whether the economy is easing, which could foreshadow interest rate cuts.

But uncertainty about when rate cuts will take place and how many there will be this year has been rife among market participants in recent weeks, alongside concerns about the impact of elevated rates on the economy. Federal Reserve officials have repeatedly said that their decision-making will be data-led.