U.S. Treasury yields head steady on Friday after the latest producer price index came in more than double Wall Street estimates and after President Trump named Kevin Warsh as his pick as the next Federal Reserve chair.
The 10-year Treasury yield rose around 2 basis points to 4.251%, while the 2-year Treasury note yield slipped about 2 basis points to 3.531%. The 30-year Treasury yield added around 3 basis points to 4.887%.
One basis point equals 0.01%, and yields and prices move in opposite directions.
December producer prices excluding food and energy, a measure of inflation at the wholesale level, climbed 0.7% in December versus November, while economists had estimated a gain of just 0.3%. The annualized non-seasonally adjusted rate of 3.3% topped Street expectations for 2.8%.
But Trump's decision to nominate Warsh, a former Fed Governor, dominated investor sentiment, ending a months-long process that began last year and included the president criticizing current Fed Chair Powell for not lowering interest rates quickly or far enough. The 12-member Federal Open Market Committee sets interest rate policy.
"I have known Kevin for a long period of time, and have no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best," Trump wrote in a Truth Social post announcing Warsh as his nominee. Warsh will need to gain approval from the U.S. Senate.
Although Warsh is likely to follow Trump's wishes and advocate for lower interest rates in the short term, investors view him as someone who wouldn't always take direction from the president and who would continue to maintain Fed independence.
"By selecting Warsh, the Administration has clearly offered a nod to the necessity of Fed credibility," wrote Ian Lyngen, head of U.S. Rates Strategy at BMO in a Friday note. "Warsh's experience at the Fed and his credibility as a central banker will surely contribute to his ability to build consensus on the FOMC and be influential in the overall direction of monetary policy."
Warsh was chosen among a pool of three other candidates which included National Economic Council Director Kevin Hassett, current Fed Governor Christopher Waller and BlackRock chief investment officer for fixed income Rick Rieder. Prior to Trump's announcement, prediction markets gave Warsh an 80% chance.
Investors are also monitoring events on Capitol Hill as the Senate on Thursday failed to advance a procedural vote on a government funding package, again putting the federal government at risk of a shutdown that could take effect on Saturday.
— Jeff Cox contributed to this report.