Double Whammy for Yields

On Wednesday, US CPI showed that the inflation rate month over month in January was 0.3% vs a 0.3% reading in December. In addition, core inflation was flat in January after a revised flat reading in December. Fed’s Powell also spoke later in the day at the Economic club of New York and said he doesn’t expect a large nor sustained increase in inflation right now. He said price rises from a burst of spending as the economy reopens is not likely to be sustained!

10-year yields have been in an upward sloping channel since August 2020. On Monday, 10-year yields tried once again to push through the top of the channel and made a post pandemic high near 1.20%, however it failed once again.

With today’s CPI data and Powell comments, its no surprise that yields moved lower.

An easy asset to use to trade bond yields is through the ishares 7-10 year treasury bond ETF, ticker IEF.

Bonds trade inversely to yields. So, if you believe yields will move lower, you would buy the ETF. If you believe yields will move higher, you would sell the ETF.

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