NEW YORK, Jan 12 (Reuters) - Treasury yields climbed on Friday as underlying U.S. consumer prices posted their biggest gain in 11 months in December, increasing expectations about a pickup in domestic inflation.
The two-year yield, which is sensitive to traders’ views on interest rates, reached its highest since September 2008. The jump in yield implied higher market confidence the U.S. Federal Reserve will enact its planned rate hikes for the year.
The Labor Department said its Consumer Price Index, excluding the volatile food and energy components, rose 0.3 percent last month, amid strong gains in the cost of rental accommodation and healthcare.
The suggestion that inflation may be rising also kicked up the 10-year yield, which indicates the market’s long-term confidence in the economic health of the United States. In the past year, inflation has remained stubbornly lower than the Fed’s target rate of 2 percent, even amid strong GDP and employment data.
At 8:54 a.m. (1354 GMT), the yield on 10-year government notes was 2.588 percent, up from 2.531 percent at Thursday’s close. The yield on two-year government bills hit a high 2.022 percent, before falling slightly to 2.018 percent at 8:56 a.m. (1356 GMT).
Other data show that U.S. retail sales increased in December as households bought a range of goods and figures for the prior month were revised higher, suggesting the economy exited 2017 with strong momentum.
Reporting by Kate Duguid; Editing by Bernadette Baum