Treasuries See Further Downside Despite Tamer-Than-Expected Inflation Data

(RTTNews) - Treasuries came under pressure over the course of the trading session on Tuesday, extending the slump seen in the previous session.

After initially showing a lack of direction, bond prices slid firmly into negative territory as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 4.2 basis points to 4.499 percent.

The ten-year yield added to the 8.2 basis point jump seen during Monday's session, reaching its highest closing level in almost three months.

The continued weakness among treasuries came as traders continued to react to Monday's news of a trade deal between the U.S. and China slashing the massive tariffs on each other's goods.

The White House said the agreement calls for the U.S. and China to each lower tariffs by 115 percent while retaining an additional 10 percent tariff.

The U.S. will retain tariffs imposed in response to the fentanyl national emergency, resulting in an effective tariff rate on Chinese goods of 30 percent.

Meanwhile, traders largely shrugged off a Labor Department report showing consumer prices in the U.S. rose by slightly less than expected in the month of April, as inflation is expected to pick back up in the coming months due to tariffs.

The Labor Department said its consumer price index inched up by 0.2 percent in April after edging down by 0.1 percent in March. Economists had expected consumer prices to rise by 0.3 percent.

Excluding food and energy prices, core consumer prices also rose by 0.2 percent in April after creeping up by 0.1 percent in March. Core consumer prices were also expected to climb by 0.3 percent.

The report also said the annual rate of growth by consumer prices slowed to 2.3 percent in April from 2.4 percent in March, while the annual rate of growth by core consumer prices was unchanged at 2.8 percent.

"While annual CPI inflation slowed to 2.3 percent to April, this may be the low point in 2025," said Nationwide Senior Economist Ben Ayers. "As tariff costs increasingly flow into consumer prices, we expect a jump in the CPI this summer, pushing the annual reading back above three percent."

"Correspondingly, economic growth should be soft over the rest of the year as higher prices and economic concerns weigh on spending activity," he added. "This puts the Fed in a difficult position of trying to balance faster inflation with a weakening economy, with rate cuts likely delayed until later in the year."

A lack of major U.S. economic data may lead to relatively light trading on Wednesday ahead of the release of an avalanche of data on Thursday.