2018.01.1722:34:00UTC+00U.S. Bond Yields Rallied after Fed’s Beige Book Indicates Inflation Buildup

Treasury yields edged up after the Federal Reserve's Beige book revealed a rise in inflationary pressures in its regional districts.

The yield on the benchmark 10-year U.S. Treasury note increased 3.5 basis points to 2.579 percent, while the yield on the 30-year bond increased 1.4 basis point to 2.850 percent.

The two-year note yield, which was most reactive to shifting expectations for central bank monetary policy, increased 2.5 basis points to 2.043 percent. The yield for the short-dated maturity has gained for 11 consecutive trading sessions.

The Fed's Beige Book, which rounds up economic anecdotes collected by regional Fed banks, painted the image of a strong U.S. economy. However, traders focused mostly on reports that wage pressures were 'modest'.

Central bankers could lift rates at a faster rate this year without incurring the skepticism of bullish bond investors, who have cited the central bank's willingness to tighten monetary policy despite the soft inflation data. A surge in inflation could ease such concerns and give a lift to long-dated yields.

In his latest statement, Dallas Fed President Robert Kaplan said there could be more than three rate hikes in 2018. Another Fed official, Cleveland Fed President Loretta Mester is set to speak later today.