From Action Economics: Treasury prices rose, and yields took a tumble on Tuesday after core CPI proved a surmountable barrier at 0.1%, while industrial production came in a little light at as well and housing starts fell (from upwardly revised June levels). The curve set a fresh low water mark for the cycle, as the 2s-10s spread broke below the +20 basis point barrier right after the data.
The 2-year yield dove 4 basis points to 4.02% and remained in that vicinity for the balance of the session. The 10-year yield tanked 9 basis points to 4.21%, before finishing just above session lows.
Moves in bonds were compounded by allocation out of stocks as investors became increasingly nervous about the toll taken by past oil price gains, though crude oil settled 19 cents lower at $66.08 a barrel. Dealers are have misgivings about the impact of oil going forward paired against the recent rebound in the economy, and this is playing out along the curve as the Fed is seen staying on track for now.