Treasury yields jump after hotter-than-expected inflation data
TLT•U.S. consumer prices rose 0.4% in October, above expectations, and Treasury yields jumped as traders increased bets on a December rate hike. The 2-year yield rose 18.7 basis points to 4.73%, while the 10-year yield gained 12.6 basis points to 4.99%.
1. Inflation lifts yields
U.S. Treasury yields rose on Tuesday after October consumer inflation came in above expectations. The Consumer Price Index increased 0.4% after rising 0.6% in September; core prices, excluding food and energy, rose 0.3%, matching September’s increase.
2. Rate hike bets grow
Fed funds futures traders expected a rate increase at the Federal Reserve’s December 8-9 meeting, with some betting on a 50-basis-point move rather than the usual 25-basis-point increment. Fed Governor Christopher Waller said a half-point hike should be considered if the inflation picture worsens. The 2-year yield rose 18.7 basis points to 4.73%, and the 10-year yield climbed 12.6 basis points to 4.99%.
3. Treasury auction
The Treasury sold $42 billion in 10-year notes at a high yield of 5.02%. The government was due to auction $25 billion in 30-year bonds on Thursday; the bond market would be closed Wednesday for Veterans Day.
