The producer price index fell 0.2% in May, lower than expectations, pushing Treasury yields lower.
notes reversed Thursday's move lower, trading slightly higher at 4.69%. Yields and prices move in opposite directions and one basis point is equivalent to 0.01%., lower than economist expectations of a 0.1% uptick and a 0.5% rise in April. On an annual basis, PPI increased by 2.2%.
"Both the headline and core US PPI inflation were significantly lower than expected, strengthening the view that inflationary pressures have finally started to ease," Rabobank researchers said in a note Friday.Deutsche Bank analysts said on Friday that, taken together, the data had led investors to grow more confident about the prospect of interest rate cuts by the U.S. Federal Reserve.
"Given those data releases, investors dialled up the prospects of rate cuts from the Fed, and the amount priced in by the December meeting was up +6.2bps on the day to 50bps," the analysts, led by Henry Allen, said in a note. "In turn, that led to a fresh rally for US Treasuries , which got another boost from a strong 30yr auction later in the session that saw the highest bid-to-cover ratio in 12 months.
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