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Market news · Nov 10, 12:01 PM ET

Hot October Inflation Pushes 10-Year Treasury Yield Back Near 5%

The 10-year Treasury yield rose back to about 5% after October consumer prices came in above forecasts and Fed Governor Christopher Waller signaled a likely December rate increase, with some traders pricing a larger move. Higher Treasury yields feed into borrowing costs such as mortgages and weigh on stocks, so the move matters to most US investors.

By Flash Finance US desk (written with AI assistance) · Editor: Kokila

Long-term US government borrowing costs jumped on Tuesday, November 10, after a key inflation report came in hotter than expected. The 10-year Treasury yield moved back toward and, in one report, above the 5% level.

Inflation came in above forecasts

According to data released by the Bureau of Labor Statistics on Tuesday, the Consumer Price Index excluding food and energy rose by 0.3% from the previous month. Overall prices increased by 0.4%. Economists had expected overall inflation to rise 0.3%, and core inflation to rise 0.2%. Gasoline costs eased through the month, which brought some relief to consumers who have been hammered by high prices for most of the year.

Waller's remarks raised rate-hike bets

Before the report, Waller said in a speech in London that he was "leaning toward supporting an increase in our policy rate of 25 basis points" if October inflation improved as he expected. He also said that if core inflation was around 0.3% or higher, "a 50 basis point hike in the policy rate should be considered at the December meeting."

Core inflation did come in at 0.3%. Market pricing moved quickly after that. Yahoo Finance reported that bets on a half-point hike jumped from 0% yesterday to 15% today. Estimates of a standard quarter-point move varied by source. TheStreet cited CME FedWatch data showing a 100% chance of a December hike, while AlphaCheck reported that the odds of a December rate hike stood at 89% on Tuesday. A BMO rates strategist said "not only is a December hike a foregone conclusion, but also that as Waller suggests, a 50 bp hike will be discussed".

Where yields stood

Yield levels differed across reports because they were captured at different times during the session. CNBC said the 10-year yield climbed more than 14 basis points to 5.004%. Other outlets recorded lower readings during the day, including 4.93% and 4.95%. The 2-year yield jumped 14 basis points to 4.69%, while the 30-year yield touched 5.3%.

Before the report, the 10-year had been lower. Bloomberg reported that the 10-year yield ticked up to 4.88%, but remained well off levels above 5% reached last month.

What it means for US investors

Higher Treasury yields tend to push up borrowing costs across the economy. NBC News noted that Treasury yields moved sharply higher on the data, which could make mortgage loans more expensive if it holds up.

Equities also reacted. Stocks fell on Tuesday after October inflation data came in hotter than expected and a key Federal Reserve official hinted at the possibility of a half-point rise in rates next month. Earlier in the week, Bloomberg reported that a Democratic sweep in the midterms led to a selloff in technology stocks that sent investors fleeing to safety.

The broader concern for investors is the path of policy rates rather than a single move. One analyst quoted by CNBC said "The bigger risk is not simply higher yields, but a higher rate path." The reports reviewed did not identify any single company as the main focus of the move, which is driven by macroeconomic data and Fed policy.

Federal Reserve10-year Treasury yieldChristopher WallerBureau of Labor StatisticsS&P 500mortgage rates

Sources

Written with AI assistance on Nov 10, 12:01 PM ET from the reports listed under Sources, and reviewed by our editor after publication. Before it was published, every figure was checked against those reports, and passages with figures that could not be found there were left out. It can still contain mistakes: read the sources before acting on anything. How we review. Not investment advice.