Treasury 10-Year Yield Increases After Biggest Inflation Jump in Years

U.S. Treasury yields rose Tuesday afternoon in a delayed reaction to the Labor Department's consumer price index report, which showed inflation continued to rise in June, accelerating at its fastest clip in nearly 13 years.

The yield on the benchmark 10-year Treasury note rose 4.6 basis points to 1.412% at 4:00 p.m. ET after remaining mostly flat in the morning. The yield on the 30-year Treasury bond rose 4.5 basis points to 2.038%. Yields move inversely to prices and 1 basis point equals 0.01 percentage points.

June's consumer price index rose 5.4% from a year ago, the largest jump since just before the financial crisis, the Labor Department reported. Economists polled by Dow Jones expected an increase of 5% year-on-year, matching the May level, which was the highest since August 2008. 

Excluding volatile food and energy prices, the core CPI rose 4.5%, the sharpest move for that measure since September 1991 and well above the estimate of 3.8%.

Despite the recovering economy and fast inflation, the 10-year Treasury yield has declined. It was at 1.58% to start July and hit a 2021 high of 1.78% in March. Traders remain confused about the exact reasons for the rollover in yields, with many citing concerns that the best of the economic recovery may be behind us.

"The headline CPI numbers have shock value, for sure; however, once you realize that a third of the increase is used car prices, the transitory picture becomes more clear. Inflation is rising, but things are well behaved and have not changed materially," Jamie Cox, managing partner at Harris Financial Group.

While CPI is an important inflation gauge, the Federal Reserve's decision-making body prefers to track the personal consumption expenditures price index.

Fed report released Friday, that Chairman Jerome Powell will present to Congress this week, reiterated the central bank's position that the current inflationary pressures are "transitory." 

Auctions are due to be held on Tuesday for $34 billion of 52-week bills, $35 billion of 42-day bills and $24 billion of 30-year bonds.

CNBC's Jeff Cox and Pippa Stevens contributed to this market report.

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