The bond market is finding some relief as recent data indicates easing inflation pressures, with the Producer Price Index (PPI) coming in below expectations. The PPI, excluding food and energy, rose 3.5% y/y, under the anticipated 3.8%, while the month-on-month figures showed a modest 0.2% increase for the headline and no change when excluding food and energy. This data suggests a slowdown in inflation, which could stabilize or even reduce bond yields, as aggressive monetary tightening by the Federal Reserve appears less likely.
This environment is favorable for bond investors, as lower inflation expectations typically lead to a decrease in interest rates, benefiting bond prices. The 30-year Treasury bond yield, which recently flirted with the 5% mark, has since retreated, providing a glimmer of hope for bond bulls. The market now turns its attention to Wednesday's Consumer Price Index (CPI) reading for further direction.
As of 09:21 on January 14, TLT, an ETF that tracks long-term U.S. Treasury bonds, is trading at $85.20, slightly down from its last close of $85.43. The ETF remains near its 52-week low of $85.04, reflecting ongoing market volatility and investor caution ahead of key inflation data.