One-month Treasury yield falls to lowest level of the year after March producer price data

What happened

• The 1-month T-bill rate
  TMUBMUSD01M,
  4.109%
  fell 27.7 basis points to 3.863% as of 3 p.m. Eastern time versus Wednesday’s closing level, according to Tradeweb. That’s the lowest level since late December.
• The yield on the 2-year Treasury
  TMUBMUSD02Y,
  4.109%
  was little changed at 3.975% versus 3.970% as of Wednesday, according to 3 p.m. figures from Dow Jones Market Data. The yield is up five of the past six trading sessions.
• The yield on the 10-year Treasury
  TMUBMUSD10Y,
  3.519%
  rose 3.2 basis points to 3.450% after factoring in reopening figures.
• The yield on the 30-year Treasury
  TMUBMUSD30Y,
  3.739%
  rose 3.3 basis points to 3.686% from 3.653% late Wednesday.
• Thursday’s levels were the highest for the 10- and 30-year yields since March 31.

What drove markets

In data released on Thursday, wholesale inflation posted its biggest drop since the start of the pandemic in early 2020, according to the March producer price index. U.S. wholesale prices sank 0.5% last month in a sign of potentially further easing in inflation ahead, and the increase over the past 12 months slowed to 2.7% from 4.9% in the prior month.

The number of Americans who applied for unemployment benefits last week rose by 11,000 to 239,000 — indicating a small but steady increase in layoffs in a generally strong U.S. labor market.

Meanwhile, Treasury’s $18 billion auction of 30-year bonds produced what BMO Capital Markets strategist Ben Jeffery described as “average” statistics.

What analysts are saying

“We expect the delayed effects of monetary tightening to become a bigger drag on activity, pushing most advanced economies into recession in the second half of the year,” said Jennifer McKeown, chief global economist, and Ariane Curtis, global economist, at Capital Economics. This should help to “clear the path for central banks to end their tightening cycles.”