Hotter-than-expected US inflation drives bond yields higher, SJF Bank says
TLT•SJF Bank linked September US inflation accelerating to 3.7% from 3.4% to rising bond yields. Core inflation reached 2.6%, above expectations of 2.5%, while markets priced a nearly 50% chance of a Fed rate increase on October 28.
1. Inflation and yields rise
SJF Bank’s October 14 analysis linked rising bond yields to September US inflation accelerating to 3.7% from 3.4%. Core inflation rose to 2.6% from 2.4%, exceeding expectations of 2.5%.
2. Markets reprice rate outlook
Markets priced a nearly 50% probability of a Fed rate increase on October 28, up from roughly 20% before the inflation release. Two-year US government bond yields rose more than 0.15 percentage points and 10-year yields climbed more than 0.1 percentage points. US stock futures signaled a sharply lower opening, particularly for the Nasdaq, while the dollar strengthened against the euro.
