EL7.AI
BondsMedium•11 November 2026•
4 min read

Bond Yields Surge on Hotter-Than-Expected U.S. Inflation and 50-Basis-Point Rate-Hike Risk

Key Facts

1U.S. core inflation rose 0.3% in October, exceeding forecasts of 0.2%.
2The probability of a 50-basis-point U.S. rate hike in December reached 10%, and markets priced in 3 quarter-point increases by the middle of next year.
3The U.S. two-year Treasury yield rose 18 basis points overnight through November 11.
4The dollar index rose 0.5% overnight, while gold fell 2.6% before rising 0.8% on Wednesday.

Global bond yields surged on November 11 after U.S. inflation data came in stronger than expected, while the dollar was steady, according to a Reuters report published via Investing.com. The figures brought back into focus the possibility that the Federal Reserve will raise interest rates by 50 basis points at its next meeting in December. Before the data were released, Fed Governor Christopher Waller had said a monthly core inflation reading of 0.3% would lead him to consider such an increase. The reading came in at the level Waller had cited, putting the larger increase on the table in the debate over U.S. policy. These concerns do not mean that major central banks generally are expected to make similar increases, as the repricing was tied to U.S. indicators and Fed officials’ remarks.

U.S. core inflation, which excludes food and energy, rose 0.3% month over month in October, exceeding forecasts of 0.2%, Reuters reported. The surprise matters because the monthly increase remained at 0.3% in August, September and October, according to the U.S. Bureau of Labor Statistics. The headline consumer price index rose 0.4% from September to October, compared with a 0.6% increase in the previous month, according to the Associated Press. The comparison shows the headline rate slowing from September, while core inflation remained above analysts’ estimates. The bureau did not publish the annual rate of change for some indicators in October because comparative survey data for October 2025 were unavailable following the funding lapse.

Inflation components diverged across energy and fuel: the energy index rose 0.7% in October, after a 5.2% increase in September, according to the Bureau of Labor Statistics. The gasoline index rose 1.0% during the month, compared with a 9.1% jump in the previous month. By contrast, strategist Brian Jacobsen said the oil shock had spread to core inflation, arguing that the issue was not limited to a rise in the headline index. He added that the cost of hiring plumbers and electricians had become a new concern for the Fed. These remarks put the core inflation reading in a broader context than energy price movements alone, while Waller said economic activity was strong and the labor market stable, but inflation remained above the bank’s 2% target.

Shifting rate expectations were reflected in bond yields across several markets. The U.S. two-year Treasury yield rose 18 basis points overnight through November 11, according to Reuters via Investing.com. The previous day, the two-year yield jumped 18.44 basis points to 4.731%, its largest daily increase since the tariff turmoil in April 2025, according to Reuters via MarketScreener. The U.S. 10-year Treasury yield also climbed 12.55 basis points to 4.988% that day. The Associated Press put the 10-year yield at 4.99% on Tuesday, up from 4.88% late Monday, despite a decline in oil prices. A higher yield generally means a lower price for an existing bond, because its fixed payments become less attractive compared with the yield available on new issues.

The increase extended to Asian bond markets: Japan’s 10-year government bond yield rose 11 basis points to 2.795%, while Australia’s yield for the same maturity climbed 6 basis points to 5.05%, according to Reuters. In currency and metals markets, the dollar index rose 0.5% overnight against its major peers. Gold fell 2.6% overnight under pressure from the stronger dollar, before recouping some losses and rising 0.8% on Wednesday. In U.S. equities, the S&P 500 lost about 0.4% on Tuesday, the Dow Jones fell 0.3% and the Nasdaq Composite dropped 0.7%, according to the Associated Press. The moves coincided with investors reassessing the U.S. rate outlook after the price data.

Fed futures showed that a quarter-percentage-point increase in December was nearly fully priced in, while the probability of a 50-basis-point increase reached 10% after the data, according to Reuters. Markets also fully priced in three quarter-point increases by the middle of next year. The half-point scenario remains separate from the path reflected in expectations for the usual increase, and Waller described a half-point increase the following month as possible, twice the usual quarter-point increase. The Federal Open Market Committee is scheduled to meet on December 8 and 9, 2026, according to the Federal Reserve’s calendar. November’s consumer price index data are scheduled for release on December 10, 2026, according to the Bureau of Labor Statistics.