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Yield curve inversion between 10-year and 2-year rates reaches biggest point since 2000

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U.S. Treasury yields dipped Wednesday on the back of much hotter-than-expected inflation data.

The 10-year Treasury yield traded 2 basis points lower at 2.935%. The 2-year rate was up more than 5 basis points at 3.097%. The 30-year bond rate rose 1 basis point to 3.128%. Yields move inversely to prices, and a basis point is equal to 0.01%.

Yields popped after the consumer price index rose 9.1% on a year-over-year basis in June, adding to growing concerns of a looming recession. That’s well above a Dow Jones estimate of 8.8% and marked the fastest pace for inflation since November 1981.

Core CPI, which strips out volatile food and energy prices, popped 5.9%, compared with a 5.7% estimate.

“The core is chugging along at a frightening clip,” said Michael Schumacher at Wells Fargo. He said fed funds futures are now pricing 81 basis points rate hike for July. That would indicate that some in the market expect a Federal Reserve rate hike of more than 75 basis points.

“With core running this strong, the Fed can’t ignore that. This is a bad number,” he said.

Treasurys

The data comes as investors assess the possibility of a U.S. economic recession.

Earlier on Wednesday, Bank of America economists said in a note that they expect the U.S. to enter a “mild recession” this year. They noted that incoming data points to slowing momentum for the economy and that inflation seems to be hindering consumer spending.

— CNBC’s Natasha Turak contributed to this report.

Correction: Inflation rose at its fastest pace since November 1981. A previous version misstated the month.

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