Treasury yields are flat as traders weigh encouraging inflation data vs. oil rebound

Treasury yields were relatively unchanged on Wednesday as traders weighed another tamer-than-expected inflation report as well as the latest move in oil prices. The yield on the 10-year Treasury note — the main benchmark for mortgages, auto loans and credit card debt — was less than 1 basis points lower at 4.581%. The yield on the 2-year Treasury note, which typically reacts in line with short-term Federal Reserve interest rate decisions, fell more than 2 basis points to 4.166%. The 30-year Treasury yield was up less than 1 basis point at 5.104%. One basis point equals 0.01%, or 1/100th of 1%, and yields and prices move inversely to one another. The produce price index dropped 0.3% in June. Economists polled by Dow Jones expected the measure to be unchanged on the month. "The Fed's war with inflation isn't over by any means, as Fed Chair Warsh made plain in yesterday's testimony, but there is good news from the front and the odds of Fed rate hikes should continue to recede as inflation at the factory level is trending lower, and producers will not be passing on their higher costs to the consumer level as much as we previously thought," said Chris Rupkey, chief economist at FWDBONDS. Oil prices moved higher on Wednesday, adding to their latest gains, after the U.S. launched fresh strikes on Iran, the U.S. Central Command said. U.S. West Texas Intermediate futures were last trading above $79 per barrel, while international benchmark Brent crude was trading above $85. On Tuesday, bond yields eased after the latest consumer price index print came in sharply lower than expected. The CPI index fell 0.4% in June to bring its year-on-year increase to 3.5%. That helped push expectations for a July rate hike by the Fed lower. Meghan Shue, chief investment strategist at Wilmington Trust, said that core inflation continues to indicate that higher energy prices have not passed through materially to inflation, while tariff headwinds continue to fade. "On the encouraging side [we're seeing] continued disinflation that should allow the Fed to cut by the end of the year," Shue told CNBC's "Morning Call" Wednesday.