U.S. Treasury Yields Dip Amid Cooling Inflation Data and Trade Developments

New York, NY – The benchmark U.S. Treasury yield fell on Tuesday after new inflation data indicated a cooler-than-expected rise for April. The yield was down less than 1 basis point to 4.451%, while the yield on 10-year notes dropped nearly 3 basis points to 3.975%.

Inflation for April showed a 2.3% rise year-over-year, which was slightly below the 2.4% increase predicted by economists, according to Dow Jones. One basis point represents 0.01%, highlighting the inverse relationship between yields and prices.

While slowing inflation is generally viewed positively for the bond market, analysts caution that this data may not fully reflect the recent impact of tariffs imposed by President Donald Trump on consumer prices. Furthermore, core inflation, which excludes volatile food and energy costs, matched expectations at 2.8%.

Roger Ferguson, a former vice chair of the Federal Reserve, commented, “I think the wait-and-see posture at this stage is still merited until we’re sure that we’re getting progress and that the uncertainty about tariffs starts to recede a little bit.”

On Monday, the U.S. and China announced a trade agreement to reduce tariffs, suspending the majority of duties on each other’s goods for 90 days. This agreement reduces reciprocal tariffs between both nations from 125% to 10%.

Michael Brown, senior research strategist at Pepperstone, remarked that while the trade news is positive, it underscores the “volatile and chaotic nature” of U.S. policy-making, which he believes is eroding the credibility of institutions and the value of assets.

Vasu Menon, managing director at OCBC, voiced concerns over the impact of Trump’s trade policy fluctuations on the U.S. economy and corporate sector. “A significant slowdown in the US economy seems almost certain, but a recession remains an uncertainty,” he noted, adding that they do not anticipate a U.S. recession at this time.