Treasury yields edge up before Tuesday's CPI release
TLT•U.S. Treasury yields rose on Monday ahead of Tuesday’s October CPI report, with fed funds futures pricing an 84% chance of a December rate hike. The Treasury sold $58 billion in three-year notes and plans $67 billion in additional notes and bonds this week.
1. Yields rise ahead of CPI
U.S. Treasury yields rose on Monday before October’s consumer price inflation report, which may sway whether the Federal Reserve raises rates at its December meeting. Economists polled by Reuters expected headline inflation to rise 0.3% and core inflation 0.2% last month.
2. Rate expectations and yields
Fed funds futures traders priced an 84% chance of a rate hike next month after October jobs data showed employers added more jobs than economists expected. The two-year yield rose 3.95 basis points to 4.562%, while the 10-year yield rose 1.48 basis points to 4.874%; the spread between them narrowed to 31.1 basis points.
3. Treasury auctions this week
The Treasury sold $58 billion in three-year notes at a 4.627% high yield, with demand 2.53 times the amount offered. Direct bidders took a record 35% share. The Treasury plans to sell $42 billion in 10-year notes on Tuesday and $25 billion in 30-year bonds on Thursday.
