U.S. Treasury yields rose on Tuesday after economic data suggested services inflation is proving hard to tame.
The 10-year Treasury yield climbed more than seven basis points to 4.693%, and earlier hit an intraday high of 4.699%, reaching its highest level since April 26. The 2-year Treasury yield gained more than two basis points to 4.299%.
Yields and prices move in opposite directions. One basis point equals 0.01%.
The moves came after the December ISM services price index came in at 64.4, up from 58.2 in November. Meanwhile, the Job Openings and Labor Turnover Survey (JOLTS) showed a higher-than-expected number of openings.
The combination of rising prices and a high level of job openings could cause traders to dial back expectations for Federal Reserve rate cuts in 2025.
ADP’s private payrolls report will follow Wednesday and is forecast to show that 130,000 jobs were added in December, before the December jobs report from the Bureau of Labor Statistics is expected Friday. That will include nonfarm payrolls data as well as the unemployment rate in the U.S.
Investors will be paying close attention to the data as it could influence their view on the potential outlook for monetary policy, specifically interest rates. It comes after the central bank in December suggested less interest rate cuts were on the horizon ahead of its next meeting on Jan. 28-29.
The Fed is widely expected to leave rates unchanged then, with traders last pricing in an around 93% chance of interest rates being kept steady according to CME Group’s FedWatch tool.
Minutes from the Fed’s December meeting are set to be released Wednesday and investors will be scanning for those for additional insight into policymakers’ thinking and their expectations for the economy.