U.S. 10-Year Treasury Yield Hits 4.99% as Rate-Hike Bets Mount
Key Facts
The yield on the 10-year U.S. Treasury note rose to 4.99% on Nov. 10, from 4.88% late Monday, as traders increased their bets on Federal Reserve rate hikes, according to the Associated Press. The move came after October consumer price data showed core inflation continued to rise. The agency said both headline and core inflation readings exceeded expectations by one-tenth of a percentage point each. In trading during the session, Bloomberg reported that the 10-year yield rose 12 basis points to 5.00%. Rising yields are putting borrowing costs in the United States under pressure as markets reprice the path of monetary policy ahead of the December meeting.
The core consumer price index, which excludes food and energy, rose 0.3% in October, the same monthly increase recorded in September, according to the Associated Press. October's reading was one-tenth of a percentage point above market expectations, as was September's reading. The figure takes on significance in light of Federal Reserve Governor Christopher Waller's position on the next rate move. Before the data were released, he said he leaned toward supporting a 25 basis point increase at the December meeting if inflation improved as he expected. But he said core inflation remaining around 0.3% or higher could warrant considering a 50 basis point increase.
Waller said in a speech published by the Federal Reserve that "economic activity is strong, the labor market is stable, but inflation is elevated, well above the committee's 2% target." He tied his position on a December increase to the path of inflation data, placing the possibility of a larger increase within a scenario conditional on core inflation failing to improve. He said he leaned toward supporting a 25 basis point increase if inflation came in better, as expected. But if monthly core inflation remained around 0.3% or exceeded that level, he said a 50 basis point increase "should be considered." October core inflation came in at 0.3%, matching the level he cited in that scenario, while markets showed increased bets on tighter policy.
Inflation components diverged in October, with the energy index rising 0.7% after a 5.2% increase in September, according to the U.S. Bureau of Labor Statistics. The gasoline index rose 1.0% during the month, after a 9.1% jump in the previous month. The shelter index rose 0.3%, accounting for more than 30% of the monthly increase in the all-items index, the bureau said. The food index also rose 0.5% in October. The figures show differing paces among energy, shelter and food components during the month, while core inflation remained at the same monthly rate as in September.
The repricing of rates also spread to asset markets, with U.S. stocks falling in early trading on Nov. 10 as Treasury yields rose, amid expectations of more persistent inflation and higher interest rates, according to the Associated Press. Bloomberg reported that the two-year yield rose 19 basis points to 4.75% during the session. Money markets added bets on at least two rate hikes by mid-2027 and began pricing in a small chance of a half-percentage-point increase in December. Against the backdrop of the tightening debate, Dallas Federal Reserve President Lorie Logan said she supported at least two increases of a quarter point each, with the pace potentially accelerating. Moves in yields, stocks and rate bets reflect how investors responded to inflation data and Federal Reserve officials' positions.
Against the backdrop of economic activity, the Associated Press reported that the U.S. economy grew at an annual rate of 3.4% in the quarter from July to September, driven largely by consumer spending. Looking ahead to upcoming data, the Bureau of Labor Statistics set Nov. 13 as the release date for October's producer price index, at 08:30 a.m. Eastern Time. It also set Dec. 10 as the release date for the November consumer price index report, at the same time. These dates follow October's reading, which kept core inflation at 0.3% for the second consecutive month. Subsequent price data will be among the indicators released before the December decision, on which Waller tied his position to the path of inflation.