US yields jump then pull back, reflecting Fed's expected patience
TLT•US Treasury yields reversed an earlier rise after September CPI inflation came in at 3.7% year over year, above economists’ 3.6% expectation. Bets on an October rate hike climbed to around 40% after the data, then eased to about 33% by late afternoon.
1. Inflation lifts yields
The consumer price index rose 0.6% in September after increasing 0.4% in August, while annual inflation accelerated to 3.7% from 3.4%. Two-year Treasury yields climbed to 4.9521%, their highest level since September 29, before pulling back as yields on longer-dated bonds also retreated.
2. Rate expectations shift
Trader bets on an October 27-28 Federal Reserve rate hike rose to around 40% from 22% before the report, then fell to about 33% by late afternoon. Recent comments from Fed officials, including Vice Chair Michelle Bowman, suggested the central bank could wait before deciding whether to raise rates again.
3. Treasury yields retreat
The two-year Treasury yield was last up 0.9 basis points at 4.802%, while the 10-year yield fell 2.7 basis points to 5.19% and the 30-year yield declined 4.2 basis points to 5.521%. The 10-year breakeven inflation rate was 2.351%, indicating the market saw inflation averaging about 2.4% annually over the next decade.
