Traders added 20 basis points of Fed tightening expectations after April PPI jumped 6% year-on-year, the highest since 2022.
A sharper-than-expected 6% year-on-year rise in US April Producer Price Index (PPI) triggered a hawkish repricing of Federal Reserve policy expectations, lifting Treasury yields and bolstering the US Dollar. The print, the fastest since 2022, exceeded all economist estimates, driven by energy costs tied to geopolitical tensions feeding into freight prices.
The surprise PPI reading followed hotter-than-expected CPI data earlier in the week, pushing traders to price in an additional 20 basis points of Fed tightening over the next year. Ten-year Treasury yields climbed to their highest levels since July, while 30-year yields breached 5%.
The dollar extended gains for a third session, with the yen weakening to 157.88 against the USD. Equities largely shrugged off the inflation data, as the S&P 500 and Nasdaq closed at record highs, supported by AI-driven optimism.