Treasury yields rise as new data shows expectations of higher inflation (2024)

U.S. Treasury yields were higher on Friday as traders digested downbeat consumer sentiment data, which indicated a significant uptick in inflation expectations.

The yield on the 10-year Treasury added more than 5 basis point to trade at 4.5%. The 2-year Treasury yield also rose by more than 6 basis points to 4.87%. Yields and prices move in opposite directions and one basis point is equivalent to 0.01%.

The moves come after the preliminary May reading for the University of Michigan's consumer sentiment index came in at 67.4, below the consensus Dow Jones call for 76.

The one-year outlook for inflation also rose to 3.5%, up 0.3 percentage point from a month ago and jumping to the highest level since November 2023. The five-year outlook also rose.

Yields on Thursday had come under pressure following strong demand in the Treasury Department's $25 billion auction of 30-year bonds and fresh U.S. unemployment data, which led investors to increase their expectations of rate cuts this year.

"The next hurdle will be the U.S. inflation numbers for April next week, but so far this month at least, investors have moved to expect a more dovish stance of monetary policy than they thought would happen at the end of April," Deutsche Bank strategists led by Henry Allen wrote in a note Friday.

Looking ahead to next week, traders are watching for U.S. consumer price index data out Wednesday.

Correction: A previous version mischaracterized the U.S. jobless claims data.