Bond Report: 10-year Treasury yield edges lower after weaker-than-expected inflation reading

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Treasury prices ticked up Tuesday, putting pressure on yields, after data showed consumer inflation remained under wraps in December.

What are major indexes doing?

The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, -0.85%  fell 1.5 basis pints to 1.833%, while the 2-year Treasury yield TMUBMUSD02Y, -0.77%  edged down 0.4 basis point to 1.572%. The 30-year Treasury bond yield TMUBMUSD30Y, -0.58%  was off 1.4 basis points at 2.29%. Yields fall as Treasury prices rise.

What’s driving the market?

The U.S. consumer-price index rose 0.2% in December, while the core measure, which strips out volatile food and energy prices, increased 0.1%. Economists surveyed by MarketWatch had forecast a 0.3% rise in the overall figure, while the core reading was expected to show a 0.2% rise.

The increase in the cost of living in 2019 climbed to 2.3% in December from 1.9% in the prior year, marking the biggest gain since 2011 driven by higher prices for gasoline, health care and rent.

Meanwhile, the U.S. and China are expected Wednesday to sign a so-called “phase one” trade agreement.

Stock-index futures were pointing to a flat start for stocks as big banks kicked off earnings season.

What do analysts say?

Treasurys “were trading effectively unchanged on the day heading into to data; since the release the market has rallied, but only slightly and already given most of it back,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets. “Our takeaway from the price action is that investors are far more focused on the trade war and/or geopolitical tensions with a side of earnings season.”

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