The 10-year Treasury yield rises as the January CPI exceeds expectations.

On Tuesday, the 10-year Treasury note's yield increased due to unexpectedly high January inflation data.

The 10-year Treasury yield increased by 15 basis points to 4.32%, while the 2-year Treasury yield rose by 19 basis points to 4.664%. Yields and prices move in opposite directions, with one basis point equal to 0.01%.

In January, consumer prices increased by 0.3% compared to December, and the annual rate of inflation rose to 3.1%. According to a poll by Dow Jones, economists predicted that the key inflation gauge would increase by 0.2% in January and 2.9% on an annualized basis.

Recent market data has cast doubt on the Federal Reserve's ability to lower interest rates multiple times this year, which has been a driving force behind the bullishness of the equity market in recent months.

According to Gregory Faranello, head of U.S. rates strategy at AmeriVet Securities, the next key level for the 10-year yield would be to hit between 4.35% to 4.36%.

He said to CNBC, "If we break through that level, it gets interesting. We could test people with fast money accounts that lean into it a bit."

Investors expect the 10-year yield to rise above 5.00% again, a level not seen since October 2023.

According to Skyler Weinand, chief investment officer at Regan Capital, a 10-year Treasury yield with a 5-handle is more likely than a 3-handle in 2024 due to persistent inflation, full employment, and strong growth, which may delay the Fed's rate cuts.

The producer price index will be released on Friday, while retail sales figures will be made public on Thursday in January.