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Treasury Yields Slip Lower, Nasdaq Stabilizes After Solid 10-Year Auction

Demand for the $41 billion in benchmark 10-year notes hit the highest levels since January as investors shrugged-off the fastest headline inflation rate since 2009.

The U.S. Treasury sold $41 billion in 10-year notes Wednesday at a high auction yield of 1.684% with solid demand for the benchmark paper following the fastest reading of headline inflation in more than ten years.

Investors bid $2.45 for every $1 on offer from the Treasury, auction data showed, firmly higher than the $2.36 bid-to-cover ratio recorded at the prior auction on April 12 and the highest since January, when the yield was 1.68%. 

So-called indirect bidders, the data indicated, took down just under 64% of the sale, an improvement on last month's sale and the best since August of 2020, suggesting foreign demand remained firm despite a much faster-than-expected reading of April inflation just a few hours earlier. 

Benchmark 10-year note yields in the open market, which hit an April 13 high of 1.692% just prior to the auction results, eased to 1.681% shortly afterward. 

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U.S. stocks also stabilized, although all three of the major benchmarks remained at session lows, with the interest rate sensitive Nasdaq falling 248 points to 13,131.55. 

U.S. consumer price inflation increased at the fastest pace in more than a decade last month, data from the Bureau of Labor Statistics indicated Wednesday, as energy and used car gains boosted the headline reading amid an ongoing debate over the nature of price increases.

Headline CPI for the month of March was estimated to have risen 4.2% from last year, and 0.8% when compared to the March reading. So-called core inflation, which strips-out volatile components such as food and energy prices, rose 0.9% on the month -- the biggest gain since 1981 --and 3% on the year, the report noted.

The so-called breakeven rate between five-year Treasury bonds and five-year inflation protected securities, a key market gauge for consumer price increases, was marked at 2.712% this week, the highest since 2006 and firmly ahead of the Fed's 2% inflation target.

Wage pressures are beginning to mount in the labor market, with JOLTS job openings data indicating 8.1 million open positions, the highest on record, while last week's April non-farm payrolls reported showed average hourly earnings rise 0.7% on the month -- against a forecast of -0.1% -- and 0.3% on the year.