(Bloomberg) -- U.S. Treasury yields extended their retreat from multiyear highs after a cooler-than-expected March inflation gauge prompted traders to pare bets on aggressive rate increases by the Federal Reserve.

Yields for two- to five-year notes led the retreat, declining more than 10 basis points aided by futures block trades. The 10-year note’s yield slid as much as 8.5 basis points to 2.695% after exceeding 2.80% earlier in the session for the first time since December 2018. The dollar fell. 

“We were set up for a bit of a bounce, in Treasuries as well as in stocks,” said Peter Tchir, head of macro strategy at Academy Securities Inc. We are seeing a bit of a buy-the-headline move. I don’t think it will last.”

The so-called core consumer price index, which excludes food and energy prices, rose 0.3% in March vs 0.5% in February. Another 0.5% increase was the median forecast in a Bloomberg survey. Including food and energy, the CPI rose 8.5% from a year earlier, the highest rate in more than four decades.

Swaps traders pared bets on the total amount of additional tightening by the Fed this year following the Labor Department report. They’re still close to fully pricing in half-point increases in May and June and expecting more than 200 basis points of rate increases in total this year. 

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