Treasury yields slid over economic indexes

The CRB commodity index hit an all-time high, PPI Thursday was at the highest in at least 10 years and yet yields are falling.

Investors still digest a lighter-than-expected September producer inflation reading. The yield on the benchmark 10-year Treasury note gave up 3 basis points, falling to 1.519% at 2:35 p.m. ET. The yield on the 30-year Treasury bond was 1.8 basis points lower at 2.023%. Yields move inversely to prices and 1 basis point is equal to 0.01%.

The PPI data wasn’t as high as feared, especially excluding food and energy. So companies might not be quite as eager to pass along higher costs.

The bigger factor is that the bond market is pricing in Fed hikes. The tone around the Fed has changed from confidence in managing an inflation overshoot to worry about high inflation. That’s the kind of thinking that will lead to sooner hikes (Sept 2022 is now 80% priced in).