Treasury yields climb after CPI report shows slowing inflation ahead of Fed decision

U.S. Treasury yields climbed Tuesday after a key inflation report showed price increases slowing, potentially bolstering the case for the Federal Reserve to skip a rate hike this week.

The 10-year Treasury yield added 7 basis points to 3.835%. The 2-year Treasury yield was trading higher by 10 basis points at 4.698%.

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

The May consumer price index showed an annual increase of 4.0%, the lowest since 2021, and just 0.1% month over month. So-called core inflation, which strips out volatile food and energy prices, was hotter with 5.3% annual increase and 0.4% monthly change.

The CPI results were in line with the Dow Jones consensus estimates.

The data comes just as the Fed is starting a two-day policy meeting. Traders expect the central bank to hold rates steady on Wednesday after hiking rates for more than a year.

Traders were pricing in more than a 90% chance of no rate hike this week after the CPI report, according to CME Group’s FedWatch tool.