U.S. Treasury yields climbed on Wednesday following the release of a hotter-than-expected U.S. inflation print, according to reports by CNBC.
The yield on the benchmark 10-year Treasury note — which serves as a key reference point for mortgages, auto loans, and credit card debt — jumped more than 7 basis points to reach 5.289%, marking its highest level since Oct. 8. Meanwhile, the longer-dated 30-year U.S. Treasury yield advanced more than 3 basis points to 5.602%.
Short-term yields also saw notable movement. The 2-year Treasury, which historically tracks the Federal Reserve’s interest rate decisions more closely, gained over 10 basis points to hit 4.895%, earlier touching its highest mark since Sept. 29. One basis point equals 0.01%, and bond yields move inversely to prices.
Inflation Data Surpasses Estimates
According to the Department of Labor data cited by CNBC, the consumer price index rose 3.7% year over year in September, outpacing the 3.6% Dow Jones consensus estimate. Core inflation, which strips out volatile food and energy components, registered at 2.6% on an annualized basis compared to the predicted 2.5% consensus.
The latest price pressures arrive merely two weeks ahead of the Federal Reserve’s upcoming interest rate decision. Christopher Rupkey, chief economist at Fwdbonds, noted that sticky inflation may require the central bank to elevate rates further and maintain restrictive monetary policy into 2027.
“The bond bulls have turned around and are running the other way as 10-year yields have shot higher after today’s shocking inflation report,” Rupkey said. “Inflation is alive and the only way the Warsh Fed knows how to kill it is with another dose of higher rates.”
Shifting Expectations for Fed Rate Hikes
Market pricing has adjusted rapidly to the new economic data. Futures trading data measured by CME’s FedWatch tool indicate that the probability of a quarter-point rate hike at the October 28 meeting—with the fed funds rate currently sitting between 3.75% and 4.00%—surged to 43.7%, up sharply from 22.1% just a day prior.
Furthermore, indicators now reflect a greater than 95% likelihood of at least one rate increase before the conclusion of the year, alongside a 40% probability that rates could climb by a half-percentage point—double the odds recorded a day earlier.
Looking toward the remainder of the week, market participants are bracing for additional economic data scheduled for release on Thursday, including the September producer price index, September retail sales data, and weekly initial jobless claims figures.