Back-to-back weaker-than-expected inflation reports are failing to calm the U.S. Treasury market, with bond yields climbing again on Friday and fueling speculation that a policy misalignment may soon force the Fed’s hand.
In a Friday report, the Bureau of Labor Statistics showed that the Producer Price Index, or PPI—a key gauge of wholesale prices—fell 0.4% month-over-month in March, marking the largest decline since 2023. On an annual basis, producer inflation slowed to 2.7%, well below economists’ estimates of 3.3% and down from 3.2% in February.
Stripping out volatile food and energy components, core producer prices fell 0.1% in the month and increased 3.3% on an annual basis, again undercutting forecasts.
Some of the sharpest PPI price declines in March included:
Eggs for fresh use: -21.3%
Fresh and dry vegetables: -13.0%
Fruits and melons: -12.2%
Gasoline: -11.7%
Diesel fuel: -6.5%
The data followed Thursday’s cooler-than-expected Consumer Price Index (CPI) report, which showed slowing price pressures at the consumer level.
Despite this cooling inflation backdrop, Treasury yields are rising. The 10-year yield climbed 7 basis points to 4.50%, while the 30-year yield rose to 4.92%, up 5 …