10-year Treasury yield falls beneath 3.44% after producer costs fell more-than-expected

US Treasury yields fell on Wednesday as December’s Producer Price Index suggested inflation may have peaked.

The return on the benchmark 10 year treasury note fell 14 basis points to 3.388%, its lowest level since September. The return on the 30-year government bond lost 9 basis points to 3.553%. Yields move inversely with prices.

The move in bond yields came as December’s Producer Price Index, which measures final demand prices across hundreds of categories, showed a stronger-than-expected decline, signaling that inflation may be starting to ease. Wholesale prices fell 0.5% for the month, while economists polled by Dow Jones had expected a 0.1% decline.

Uncertainty has reigned among traders for the past few weeks as to whether the Federal Reserve will hike rates by 25 or 50 basis points at its next meeting on Jan. 31 and Feb. 1.

Many are concerned that the pace of rate hikes the Fed has carried out so far to combat high inflation could drag the US economy into recession and hope the central bank will be able to slow it down further or completely stop hiking cycle this year.

Four Federal Reserve officials will deliver speeches Wednesday: Atlanta Fed President Raphael Bostic, Philadelphia Fed President Patrick Harker, St. Louis Fed President Jim Bullard, and Dallas Fed President Lorie Logan.

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