U.S. Treasury yields ticked higher on Friday as investors digested the latest inflation report and considered the outlook for Federal Reserve interest rate hikes.
The yield on the 10-year Treasury rose more than 1 basis point to 3.46%. The 30-year rate climbed 3.2 basis points to 3.606%. The 2-year rate, meanwhile, was flat at 4.135%.
Yields and prices have an inverted relationship. One basis point equals 0.01%.
Thursday’s consumer price index report was in line with expectations, showing that prices of goods and services fell by 0.1% in December on a monthly basis.
Investors are now considering what that means for the Fed’s next interest rate decision on Feb. 1, as uncertainty about whether the central bank will hike rates by 25 or 50 basis points then has spread.
Many are hoping for the Fed to slow, or pause, rate increases this year. Concerns that the pace of rate hikes so far would lead the U.S. economy into a recession have grown in recent months.
Speaking at a local event in Pennsylvania on Thursday, Philadelphia Fed president Patrick Harker indicated he was prepared to move to 25 basis point rate hikes. Other Fed officials suggested on Thursday that the CPI print was encouraging, but did not give clear hints about how it could influence policy decisions.
Investors will follow further remarks from Fed speakers on Friday and gain fresh insights into the state of the U.S. economy from a consumer perspective as the preliminary Michigan Consumer Sentiment report for January is due.
Bond markets will remain closed on Monday for Martin Luther King day.