US Treasury bond yields fell in early Friday trading before retail data was released later that morning.
The benchmark 10-year Treasury note yield fell to 1.651% at 3:50 a.m. ET. The yield on the 30-year government bond fell to 2.376%. The returns move inversely to the prices.
Yields fell after rising after a higher than expected inflation reading on Wednesday. The consumer price index in April rose 4.2%, the largest year-over-year increase since 2008, and was well above the 3.6% expected by economists.
However, government bond yields shook off Thursday’s above-expected producer price index, a more indirect indicator of inflation. The April PPI rose 0.6% from the previous month, outperforming the expected growth of 0.3%. It rose by 6.2% compared to the previous year and was thus well above the forecast of 3.8%.
Mike Gallagher, executive director of macro and strategy at Continuum Economics, told CNBC’s Squawk Box Europe on Friday that the year-over-year inflation index numbers “may be a little misleading.”
Instead, he focused on the monthly price index numbers for CPI and personal consumption expenditure.
While the Federal Reserve has insisted that inflation spikes are temporary, Gallagher said that if the central bank is wrong, “then the market, especially the bond market, will require the Fed to act a little earlier” to support its simple policy to change.
“We’re not there yet,” he added.
In relation to the data to be released on Friday, April, retail sales are slated to be released at 8:30 a.m. ET.
The April industrial production data will then be released at 9:15 a.m. CET.
No auctions are planned on Friday.
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