10-year Treasury yield jumps as September core inflation comes in hotter than expected
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The 10-year Treasury note yield rose on Wednesday following the latest U.S. inflation print.
The yield on the 10-year Treasury note — the main benchmark for mortgages, auto loans and credit card debt — jumped more than 2 basis points to 5.242%. It had reached the highest level since Oct. 8 earlier in the day.
The longer-dated 30-year U.S. Treasury yield — which tends to react most to geopolitical events — was up less than 1 basis point to 5.568%.
The 2-year Treasury — which closely tracks the Fed's interest rate decisions — gained more than 5 basis points to 4.852% after earlier hitting its highest level since Sept. 29.
One basis point equals 0.01%, or 1/100th of 1%, and yields and prices move inversely.
The consumer price index rose 3.7% year over year in September, higher than the Dow Jones consensus estimate of 3.6%. Core inflation, excluding food and energy prices, came in at 2.6% on an annualized basis, versus the 2.5% consensus estimate.
The latest inflation reading comes just two weeks before the Fed's next interest rate decision.
With inflation remaining sticky, the central bank may need to raise rates higher and keep them there for longer in 2027, said Christopher Rupkey, chief economist at Fwdbonds.
"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," he said. "Inflation is alive and the only way the Warsh Fed knows how to kill it is with another dose of higher rates."
Odds for an October 28 quarter-point hike in the fed funds rate — currently 3.75% to 4.00% — increased to roughly 39% from just 22.1% a day ago, according to futures trading measured by CME's FedWatch tool .
There is now a greater than 95% chance of at least one hike before the year is out, and included in that is a 40% chance that rates are higher by a half-percentage point — double the odds one day ago.
Looking ahead to the rest of the week, investors also await the September reading for the producer price index, September retail sales data and weekly initial jobless claims figures, all due on Thursday.
— With additional reporting by CNBC's John Melloy.
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