- The consumer price index for May is set to be released Thursday.
- Economists are expecting the CPI to rise 4.7% from a year earlier, according to Dow Jones.
The U.S. 10-year Treasury yield fell below the 1.5% level on Wednesday, despite an anticipated rise in inflation and more data due Thursday.
The yield on the benchmark 10-year Treasury note fell 3.7 basis points to 1.491% as of 4:14 p.m. ET. The yield on the 30-year Treasury bond dropped 3.9 basis points to 2.17%. Yields move inversely to prices. One basis point is equal to 0.01%.
"Everybody is reaching for an explanation," said George Goncalves, head of macro strategy at MUFG. "It's got to be short-covering. I think what we're experiencing is a rethinking of the narrative at the same time...We're living through the peak of the activity, the peak of the inflation and markets are supposed to be forward looking."
Yields declined and prices rose after solid demand at the government's 10-year note auction midday.
"The 10 yr note auction was great," Peter Boockvar, chief investment officer of Bleakley Advisory Group, said in a note.
The consumer price index for May is set to be released Thursday. Economists are expecting the CPI to rise 4.7% from a year earlier, according to Dow Jones. In April, the CPI increased 4.2% on an annual basis, the fastest rise since 2008.
"While tomorrow we'll see a May figure for CPI, I think we won't either break below or break above the 1.50-1.75% (more than just a few bps) range until we see the June, July and August numbers because we'll be far enough away from the easy comps and we'll know what pricing power businesses really have," Boockvar said.
Investors have been watching inflation data closely, with concerns that it could prompt the Federal Reserve to taper asset purchases sooner rather than later, despite the central bank having argued that higher price pressures were temporary.
Job openings in April hit a new record high of 9.3 million, according to the Labor Department's Job Openings and Labor Turnover Survey released Tuesday. Markets had been expecting 8.18 million job openings, according to FactSet.
Negotiations for a comprehensive infrastructure bill fell apart Tuesday after President Joe Biden and a small group of GOP senators failed to reach a compromise. Biden then spoke with a bipartisan group of senators working on a backup infrastructure plan.
Wholesale inventory data for April is due out at 10 a.m. ET on Wednesday.
— CNBC's Patti Domm contributed to this market report.