Treasury Yields Dip as Investors Weigh Mild Inflation and Easing Trade Tensions

U.S. Treasury yields edged slightly lower on Wednesday as investors processed new economic data and trade developments. The 10-year Treasury yield dipped by 1.4 basis points to 4.485%, while the 2-year yield slipped to 4.009%. These moves came as markets digested April’s inflation figures and updates on international trade relations, especially between the U.S., China, and the U.K.

The April Consumer Price Index (CPI) came in softer than expected, rising 2.3% year-over-year compared to the forecasted 2.4%. Core inflation, which strips out volatile food and energy costs, aligned with expectations at 2.8%. This milder inflation print helped calm investor nerves following concerns about price spikes triggered by newly imposed tariffs.

Just weeks earlier, the Federal Reserve had warned about the risk of stagflation due to steep tariffs enacted by President Trump. However, the inflation data, combined with recent diplomatic progress, has eased some of those fears. The U.S. has reached a temporary trade agreement with China and struck a deal with the U.K., while also pausing reciprocal tariffs for most countries for 90 days.

Analysts from Deutsche Bank emphasized that it may be too early to see the full impact of April’s tariffs in the current data. They suggested any real influence on consumer prices likely won’t surface until June. For now, the muted inflation response gives the Fed and investors some breathing room.

Looking ahead, market participants are closely watching for Thursday’s release of the producer price index and retail sales numbers. These upcoming reports will provide additional clues about the health of the U.S. economy and how it might respond to lingering trade policies and interest rate decisions later in the year.

Source: CNBC