Treasury yields jump as hot consumer inflation boosts rate hike bets

TLT•2026-10-14

U.S. Treasury yields rose after September CPI increased 0.6% month over month and 3.7% year over year, above economists’ 3.6% expectation. Traders lowered the odds of the Fed holding rates steady in October to 53% and raised the probability of a December hike to 93%.

1. Inflation lifts yields

Treasury yields climbed across maturities after September consumer prices rose 0.6%, following a 0.4% increase in August. CPI was up 3.7% from a year earlier, compared with economists’ 3.6% expectation and a 3.4% annual increase in August. Gasoline prices rose 7.1% in September.

2. Rate expectations shift

Traders priced in a 53% probability that the Federal Reserve would hold rates steady at its October 28 meeting, down from 78.4% before the data. The probability of a December rate hike rose to 93% from 87.9%. The two-year Treasury yield reached 4.9521%, its highest since September 29, before trading at 4.903%; the 10-year yield rose to 5.3% and the 30-year yield to 5.619%.