US Treasury yields edged higher on Thursday as economic data showed US inflation buildup remained modest and labor markets were strong, reinforcing expectations the Federal Reserve will maintain its rate increase schedule. The consumer price index (CPI) rose 0.1 percent in June, slightly less than analysts had forecast. The CPI core rate, which better reflects the underlying inflation trend, came in at 0.2 percent month-over-month and 2.3 percent year-over-year, in line with expectations of economists polled by Reuters.
The CPI readings supported the view that inflation is near the Federal Reserve's 2-percent goal. Federal Reserve Chairman Jerome Powell said in an interview on National Public Radio's Marketplace program that he was "not declaring victory" over inflation after meeting the Fed's 2 percent target. "(The economic data) all fits within the within the context of firming inflationary trends with an extended economic expansion. And it's really fitting within that thesis of why the Fed has continued to raise short-term rates and is likely to continue to do so throughout this year," said Bill Northey, senior vice president at US Bank Wealth Management in Helena, Montana.
The Treasury sold $14 billion worth of 30-year bonds, wrapping up three days of auctions that increased coupon-bearing government debt by $69 billion. Benchmark 10-year Treasuries yielded 2.853 percent, pulling the price down 2/32 of a point by 3:52 p.m. (1952 GMT).
US 2-year note yields earlier reached 2.602 percent, matching a level seen a month ago that was the highest since August 2008. They have since dipped back to 2.594 percent. The spread between 2-year and 10-year Treasuries fell to 25.50 basis points, its lowest level since mid-2007.
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