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10-Year Treasury Yield Briefly Tops 3.52% as Data Watched by the Fed Shows Inflation Increase

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Treasury yields climbed on Friday as a key inflation report watched by the Federal Reserve indicated a sizable increase in prices.

The yield on the benchmark 10-year Treasury was up by a little over 2 basis points to 3.515% after topping 3.52% earlier in the session. The 2-year Treasury yield was last trading at 4.205% after rising by around 3 basis points. Yields and prices have an inverted relationship and one basis point equals 0.01%.

The core personal consumption price expenditures index rose by 4.4% from a year ago in December, the Commerce Department reported Friday. That was in line with economists' consensus estimate from Dow Jones. Including food and energy costs, inflation was up 5% on an annual basis.

After a string of lighter inflation readings lately, the data may have disappointed some traders. Still, the core inflation number does represent a slight slowdown from a 4.7% annual pace reported in the prior month.

The data could impact the Fed's next interest rate decision, which is expected at the conclusion of its next meeting on Feb. 1. Many investors are hoping for the central bank to slow the pace of interest rate hikes further and announce a 25 basis point increase then.

Concerns about the pace of rate increases so far leading the U.S. economy into a recession have spread in recent months.

Investors also digested economic data released on Thursday, including the GDP reading for the final quarter of 2022. It showed that the U.S. economy expanded by 2.9%, which was just above the 2.8% expected by economists previously surveyed by Dow Jones.

Between Friday's data and the GDP print, yields are higher on the week, but down since highs notched late last year. The 10-year yield ended last Friday at 3.48%.

Despite the these moves, the trend is likely still down, said Tim Lesko of Mariner Wealth Advisors

"I think you've seen the 10-year continue to work its way generally south and that will spur mortgage demand and make the longer-term, longer-dated purchases for people more affordable," he said. "The short run is a window of the Fed, the 10-year's more of a window of the economy."

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