US treasury bonds fall on wholesale pricing report

Prices fell and yields rose on US Treasury bonds on Wednesday. Driving the falling prices was the news that wholesale prices in the US were up more than had been expected in July. The reaction to the news was a sell-off even though energy prices were the main factor in the rise, and even though Tuesday’s release of the Consumer Price Index that showed retail prices remaining at a reasonable level.

In afternoon trading in New York, 2-year Treasury bonds had gained 4.3 basis points to yield 4.051 percent, while the 10-year bond was up by 6.4 basis points to a yield of 4.277 percent.

In the eurozone, however, government bonds saw prices up and yields down after a successful German bond auction. The 10-year Bund dropped 0.1 basis points to a yield of 3.231 percent. UK gilts were mixed after the release of the minutes of the Bank of England’s monetary policy committee minutes, which revealed that the vote to cut interest rates earlier in the month was a very close 5 to 4.

With Tuesday’s inflation data showing the UK rate of inflation up, it has become increasingly certain that interest rates will not be cut again soon. While the 2-year gilt gained 0.6 basis points to yield 4.216 percent, the 10-year gilt lost 1 basis point and was yielding 4.286 percent.

Meanwhile in Japan, the 10-year government bond lost 4.5 basis points to yield 1.425 percent, even though yields have been rising over the past month and a half.

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