Global bonds fell and the dollar held firm after US core inflation rose 0.3% in October, above the 0.2% forecast, increasing fears of a half-point Fed rate hike in December. Futures priced in a 10% chance of that move, while two-year Treasury yields surged 18 basis points.
US core inflation rose 0.3% month over month in October, above the 0.2% forecast. Fed officials offered differing views on the pace of further increases: Christopher Waller said a 0.3% core reading would prompt him to consider a 50-basis-point hike in December, while other officials called for additional or gradual increases.
Fed funds futures implied a quarter-point move in December was essentially locked in, with a 10% probability of a 50-basis-point increase. Two-year Treasury yields surged 18 basis points overnight. Japan’s 10-year government bond yield rose 7 basis points to 2.755%, while Australia’s rose 6 basis points to 5.05%.
Asian shares and US stock futures rose, while the dollar gained 0.5% overnight against major peers. Gold fell 2.6% overnight to $4,030.56 an ounce before edging up 0.2% on Wednesday. Oil prices rebounded, with Brent up 0.7% to $92.16 a barrel.
