Investors anxious as U.S. Treasury yields decline ahead of key inflation data

On May 15, 2025, U.S. Treasury yields experienced a decline as traders and investors awaited significant economic data that would shed light on the state of inflation and the economy. The 10-year Treasury yield fell by just over one basis point to 4.5%, while the 2-year yield decreased by more than 2 basis points to 4.032%. Market fluctuations were influenced by recent monetary policies and announcements, including reciprocal tariffs introduced by U.S. President Donald Trump in April, which heightened economic concerns. Additionally, the decline in yields followed a relatively tame inflation reading, with consumer prices rising at a slower rate than anticipated. Specifically, the consumer price index indicated a 0.2% increase in April, which was below the expected 0.3% increase. This news contributed to a more optimistic outlook among investors, encouraging them to lean towards lower Treasury yields. The market was also gearing up for the announcement of the Producer Price Index (PPI) scheduled for later that morning. Investors were particularly focused on the potential implications of upcoming retail sales and industrial production data for April, as well as weekly jobless claims. These metrics are essential in gauging the overall health of the U.S. economy. A sense of optimism remained in the air following a recent trade agreement between the U.K. and the U.S., as well as a temporary truce in tariff disputes between the U.S. and China. Despite these positive signs, uncertainty remained, especially regarding the economic impact of the recently announced U.S. tariffs, which had been as steep as 145%. This mixed environment reflects the constant balancing act between various economic indicators, trade agreements, and the ongoing global economic situation. Investors are navigating through the potential risks and rewards as they await critical data that could significantly alter their expectations for the economy's trajectory.