Stocks, Deby Yields Sag On Inflation Hike, Poor Bond Auction

Bond yields jumped and global share prices slipped after posting new highs on Tuesday as the biggest hike in US inflation in 13 years rattled investors who fear rising interest rates could end a stock market rally that has doubled prices from 2020 lows.

The yield on US Treasury debt initially fell on news the US consumer price index in June jumped 5.4% year over year, the largest gain since August 2008, the Labor Department said, Herbert Lash and Tom Arnold reported for Reuters on July 12, 2021.

But a weak Treasury auction sparked a 4.7-basis-point jump in the benchmark 10-year note to 1.41% after initially falling to 1.343% after the CPI data was released.

The inflation spike followed a 5.0% increase in the 12 months through May, while CPI rose 0.9% month over month after advancing 0.6% in May, gains that unnerved investors.

Stocks on Wall Street at first took the CPI data in stride, bidding up technology stocks that typically thrive with low interest rates.

The $24 billion of 30-year bonds were sold to yield 2.00% or more than two basis points above where the debt had traded before the auction. The jump in inflation ultimately is a negative hanging over a market that has enjoyed a remarkable rally since the lows of March 2020, said Rick Meckler, a partner at Cherry Lane Investments in New Vernon, New Jersey.

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