Treasury-yields surge after CPI data

Tuesday saw a spike in the yields on US government bonds as the January inflation reading surprised analysts by being higher than expected.

The yield on the 2-year Treasury bond surged to 4.5922%. The 10-year yield recovered to 4.273%, levels last seen in late November. The yield over 30 years reached 4.435%.

In January, the consumer price index increased by 3.1% year over year, above the 2.9% predicted by economists.

The CME FedWatch Tool showed that the likelihood of a rate cut by the Federal Reserve at its March meeting had dropped from 16% on Monday to 5.5%.

From 39.3% on Monday, traders are now placing 64.5% of bets that the central bank would hold rates constant through its May meeting. Through the June meeting, the odds of only one 25 basis-point drop were as high as 51.9%.