The inflation numbers support the bond outlook as investors would generate a greater real yield, or yield after inflation, in a low inflation environment. On the other hand, a rise in inflation would erode the value of bond’s fixed interest payments.
Moreover, lackluster economic data, specifically, the Commerce Department’s dip in retail sales data in May, also weighed on market sentiment.
Consequently, given the weak economic and inflation data points, observers are questioning whether or not the Fed can maintain its current level of monetary tightening.
“It could feel like a bus that never shows up if you’re waiting for yields to spike higher. If you’ve been sitting in cash and waiting for yields to rise before getting back to your strategic allocation to fixed income, you may want to start dollar cost averaging toward your target,” Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management, said, according to ETF.com.
For more information on Treasuries, visit Treasury bonds category.