Treasury yields end at lowest in over 2 months after wholesale prices unexpectedly fell in May

By Vivien Lou Chen

Rates on U.S. government debt finished lower for a third straight session on Thursday following a solid 30-year government-bond auction and data that added to evidence of easing inflation.

What happened

The yield on the 2-year Treasury BX:TMUBMUSD02Y fell 6.2 basis points to 4.686%, from 4.748% on Wednesday. The yield on the 10-year Treasury BX:TMUBMUSD10Y dropped 5.5 basis points to 4.239%, from 4.294% on Wednesday. The yield on the 30-year Treasury BX:TMUBMUSD30Y slipped 5 basis points to 4.4%, from 4.450% on Wednesday.All three rates have finished lower nine out of the past 11 sessions. Thursday's level for the 2-year yield was the lowest since April 4, based on 3 p.m. Eastern time figures from Dow Jones Market Data. Ten- and 30-year yields finished at their lowest levels since March 28.

What drove markets

Treasury's $22 billion auction of 30-year bonds was met with nondealer bidding of 86.3%, above the 84.3% reopening average, according to strategist Vail Hartman of BMO Capital Markets. The auction stopped through by 1.5 basis points and the bid-to-cover ratio, a gauge of demand, was above average, the strategist said.

Earlier in the day, U.S. economic data showed that wholesale prices fell in May for the second time in three months. The producer-price index dropped 0.2% last month, versus the 0.1% increase expected by economists.

Separately, initial jobless claims surged by 13,000, to 242,000, for the week that ended June 8. That's the highest level of claims since last August and above the 225,000 figure expected from economists polled by the Wall Street Journal.

What analysts are saying

"Inflation took two steps in the right direction last month after surprising to the upside in early 2024," said Bill Adams, chief economist for Comerica Bank in Dallas. Thursday's producer-price index for May "reinforces expectations for a soft print of the Fed's preferred measure of inflation, the personal-consumption expenditures price deflator, when it is released later this month."

-Vivien Lou Chen

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06-13-24 1545ET

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