U.S. government debt yields fell today on meek inflation data as the U.S. Labor Department revealed that its U.S. producer price index was unchanged in July, falling short of the 0.2% increase expected by a Reuters poll of economists. The yield on the benchmark 10-year Treasury note fell to 2.937 while the 30-year note went down to 3.074 as of 3:15 p.m. ET.
The Labor Department data also showed that In the 12 months through July, the core PPI increased by 2.8%, which follows a 2.7% increase in June. The tame PPI follows data that showed signs of a robust economy, especially with the Commerce Department announcing a 4.1% increase in GDP during the second quarter.
“Both the headline and core indexes were constrained by a 0.8% drop in the volatile ‘trade services’ component, which measures profit margins for retailers and wholesalers. This is a correction, following a run of big increases; it likely does not mark the start of a sustained run of smaller core PPI numbers,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
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Corporate Debt Bond ETF Gains
While Treasury yields dipped, corporate bond-focused fixed-income ETFs like the iShares Intermediate Credit Bond ETF (NASDAQ: CIU) gained. CIU was up 0.16% in today’s trading session and up 0.38% the past month.
CIU seeks to track the investment results of the Bloomberg Barclays U.S. Intermediate Credit Bond Index. The ETF’s focus is on investment-grade corporate debt and sovereign, supranational, local authority and non-U.S. agency bonds that are U.S. dollar-denominated and have a remaining maturity of greater than one year and less than or equal to ten years.
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Final Round of Government Note Selloff
On Tuesday, the Treasury began auctioning off $34 billion worth of 3-year Treasury notes, its largest in the last eight years, as part of a $78 billion quarterly government refunding effort. The selloff commenced on Wednesday with $26 billion worth of the benchmark 10-year Treasury notes and will cap off today with an all-time high of $18 billion in 30-year notes.
Per MarketWatch, the demand for 30-year notes “drew weaker appetite than had been expected, according to sources. Bond investors absorbed an auction of $26 billion in 10-year notes Wednesday, which saw strong bidding, according to sources.”
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