US yields climb on tepid CPI, traders dial back Fed cut bets

• April CPI softer than forecast; headline rises 0.2% MoM, core CPI steady at 2.8% YoY.
• Markets eye May CPI for tariff effects; real yields climb to 2.21%, weighing on Gold.
• Fed rate cut bets reduced to 52 bps from 76 bps after trade truce and firm inflation print.

US Treasury yields rose across the entire yield curve on Tuesday after the latest US inflation report was surprisingly softer than expected, as investors had anticipated a slight uptick due to trade tariffs. At the time of writing, the US 10-year Treasury note yield had edged up more than two basis points to 4.495%.

10-year yield rises to 4.495% as markets eye inflation pipeline and real yields cap Gold's rebound

The release of April's US Consumer Price Index (CPI) data kept US yields steady. However, there is an expectation that May figures will more likely reflect the impact of tariffs.

The US CPI rose by 0.2% MoM after sliding -0.1% in March, the first decline since May 2020. Expectations were that CPI would rise 0.3%. Every year, CPI increased 2.3%, down from estimates and March's 2.4%.

Core CPI expanded 0.2% last month, up from 0.1% in the prior month. In the twelve months to April, core cPI increased 2.8%, unchanged from March's numbers.

On Monday, US yields rose sharply as Washington and Beijing agreed on a 90-day pause in tariffs, with both countries, the US and China, reducing duties significantly. Washington tariffs on Chinese imports stand at 30%. Tariffs for Chinese imports of US products stand at 10%.

US real yields are also climbing, capping Gold's advance

The US 10-year real yields, which are the difference of the US 10-year nominal yield minus inflation expectations for the same period, surge three basis points at 2.21%.

Traders priced out one interest rate cut by the Fed, as market participants expect only 52 basis points (bps) of easing, contrary to the 76-bps scheduled on May 7.

US 10-year Treasury yield chart / Fed interest rate probabilities