Yields tumble as risk-off sentiment continues. Treasury yields declined throughout the session today as artificial intelligence and geopolitical uncertainty reduced risk appetite. Yields closed 3-7 bps lower across the curve, with the 2-year yield at 3.37% (a 10 bp decline on the week) and the 10-year yield at 3.94% (a 15 bp decline on the week). Meanwhile, equities sold off on tech bubble anxiety, with the S&P 500 and NASDAQ closing 0.43% and 0.92% lower, respectively. With today’s decline, the S&P 500 saw its biggest monthly loss since March. Oil prices surged today as United Nations atomic inspectors revealed that Iran was conducting some activity at bombed uranium-enrichment sites.
Producer prices continue to rise on services costs. The producer price index in January increased 0.5% month-over-month, the biggest jump since September, as December’s PPI reading was revised downward from 0.5% to 0.4%. Meanwhile, core PPI, which excludes food and energy, saw its biggest advance since July, at 0.8% against 0.3% estimated. Wholesale prices have continued to rise as tariffs on imported goods motivate producers to raise prices to protect their margins. January’s PPI reports adds to evidence that inflation is remaining sticky, with many of the components of the data also used in the PCE price index, the Fed’s preferred inflation gauge.
Tokyo CPI shows price pressures continue to ease. Tokyo CPI, a leading Japanese inflation measurement, showed inflation fell in February to its lowest pace in over a year. The decline was largely driven by Prime Minister Takaichi’s utility subsidies, which have helped lower energy costs. Consumer prices excluding fresh food rose 1.8% YoY, the smallest increase since October 2024, though slightly above market expectations of a 1.7% YoY gain. The data comes as the BOJ weighs rate hikes, however today’s data alone is unlikely to have an impact on the central bank’s longer term policy objectives. Markets are currently pricing in a 69% chance of a rate hike by April, and the BOJ’s next policy decision will come on March 19.