U.S. Treasury yields rose again on Tuesday as investors assessed the implications of a surprisingly hot inflation reading, which showed consumer prices rising to their highest in nearly three years.
The 10-year Treasury yield — the benchmark for mortgage lending, auto loans and credit card debt — increased more than 4 basis points to 4.459%.
The yield on the 2-year Treasury note, which closely tracks short-term Federal Reserve interest rate policy, was more than 4 basis points higher at 3.989%. The 30-year Treasury bond yield also rose by more than 3 basis points to reach 5.023%.
One basis point equals 0.01%, or 1/100th of 1%, and yields and prices move inversely to one another.
Non-seasonally adjusted consumer prices rose at an annual rate of 3.8% in April, the highest since May 2023, and faster than the 3.7% year-over-year inflation expected by economists polled by Dow Jones.
Annual core inflation, excluding food and energy, rose to 2.8%, also above the 2.7% anticipated by economists.
By either measure, inflation is running far ahead of the central bank's stated goal of 2%, which the Fed seeks in order to meet its objective of ensuring stable prices in the economy.
The inflation spike since the outbreak of the Iran war in late February comes as Kevin Warsh, the incoming Federal Reserve Chair, faces the most divided Federal Open Market Committee in more than 30 years. The Fed has kept its benchmark overnight rate steady between 3.5%-3.75% since December.
"Today's inflation report is certainly another nail in the coffin of the idea Fed officials have to welcome the new Fed Chair with an interest rate cut this year," wrote Chris Rupkey, chief economist at FWDBONDS.
Fed funds futures were last pricing in a somewhat greater chance of the Federal Reserve moving to tighten interest rate policy this year. The likelihood of one quarter point hike coming by the end of December rose to 25%, up from 21.5% on Monday, according to the CME FedWatch tool.
— CNBC's Jeff Cox and Alex Harring contributed to this report