Two-year Treasury yield jumps 18.44 basis points as curve flattens after October inflation
Key Facts
U.S. Treasury yields rose and the yield curve flattened on November 10 after October data showed a 0.4% monthly increase in the consumer price index, above the 0.3% forecast by economists polled by Reuters. The two-year yield jumped 18.44 basis points to 4.731%, its biggest daily gain since the April 2025 tariff turmoil. The 10-year yield rose 12.55 basis points to 4.988%. The move followed comments by Federal Reserve Governor Christopher Waller before the data release on the path of interest rates at the December meeting. Together, the higher-than-expected reading and Waller’s message put the prospect of tighter monetary policy back in focus.
Headline inflation slowed from a 0.6% monthly increase in September to 0.4% in October, but exceeded economists’ estimate. Core inflation, which excludes food and energy, rose 0.3%, the same pace recorded in August and September. The shelter index increased 0.3% during the month, compared with a 0.4% gain in September. The energy index rose 0.7% after increasing 5.2% in September, and the food index advanced 0.5%. The figures came in a single report that showed some monthly pressures easing while core inflation held at its previous pace.
Waller had said he would support a 25-basis-point increase in December even if October data showed an improvement in inflation. But he put a larger move on the table if monthly core inflation came in around 0.3% or above, saying a 50-basis-point increase “should be under consideration” at the December meeting. October’s core inflation reading matched the threshold he cited in his remarks. Waller described economic activity as strong and the labor market as stable, but said inflation remained well above the committee’s 2% target. His comments put the size of any potential increase at the center of the debate ahead of the next meeting.
Against that backdrop, Waller noted that personal consumption expenditures inflation rose 0.5% in September and 3.7% over the previous twelve months. Core inflation as measured by personal consumption expenditures rose 0.3% in September and 3.1% year over year. Those figures differ from the October consumer price index reading because they refer to another measure and an earlier period. The Bureau of Labor Statistics did not publish a year-over-year change in the consumer price index for October 2026 after it was unable to collect October 2025 data during the government funding lapse. The available comparison in the October release therefore focuses on monthly changes.
The repricing also weighed on U.S. stocks. The S&P 500 closed down 0.4% at 7,520.93, while the Dow Jones fell 0.3% to 52,231.89. The Nasdaq Composite dropped 0.7% to 25,065.87. Reuters linked the stock decline to concerns about persistent inflation and the possibility of a larger rate increase. The U.S. Treasury contract tracked by EL7 also closed at 106.25 on November 10, compared with 107.0625 in the previous session. The contract’s price decline accompanied rising Treasury yields in the market.
The Federal Open Market Committee’s next meeting is scheduled for December 8 and 9, 2026, after the October 27 and 28 meeting left the target rate range unchanged. The Bureau of Labor Statistics will release November consumer price index data on December 10 at 8:30 a.m. Eastern time. Until then, according to the published schedule, the next inflation reading for investors will come after the committee’s scheduled December meeting. This follows October data showing a monthly core increase at the level Waller linked to the possibility of considering a larger increase. Waller’s comments and the price data together set the context for the anticipated debate over the December decision.