This article was originally published on ETFTrends.com.
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.
Corporate Debt Bond ETF Gains
While Treasury yields dipped, corporate bond-focused fixed-income ETFs like the iShares Intermediate Credit Bond ETF (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.
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."
For more trends in fixed income, visit the Rising Rates Channel.
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