The key facts

  • The 10-year yield rose 8.8 basis points to 4.954%, the 30-year yield 6.5 basis points to 5.321%, and the two-year yield 13 basis points to 4.677%.
  • Consumer prices rose 0.4% in October against a forecast of 0.3%; core inflation was 0.3% versus a forecast of 0.2%.
  • Waller suggested a 50-basis-point hike in December if inflation proves significantly stronger than expected.

Markets price in a tighter Fed policy

US Treasury yields rose on Tuesday after October inflation data came in hotter than expected and comments by Federal Reserve Governor Christopher Waller raised concerns about a larger rate hike in December, Anadolu reports. The yield on 10-year notes climbed 8.8 basis points to 4.954%, while 30-year yields rose 6.5 basis points to 5.321%. The yield on two-year notes, most sensitive to expectations of Fed policy, jumped 13 basis points to 4.677%. Yields move inversely to bond prices; one basis point equals 0.01 percentage point.

Inflation and labor market beat forecasts

US consumer prices rose 0.4% in October from the previous month, exceeding economists' expectations of 0.3%, although the monthly increase slowed from 0.6% in September. Core inflation, excluding volatile food and energy prices, came in at 0.3% — unchanged from September but above the forecast of 0.2%. The data followed stronger-than-expected employment figures: in October the US economy added 165,000 jobs, more than double the forecast of 65,000.

Waller floats a 50-basis-point hike

Before the report, Waller made clear that if inflation turns out to be significantly stronger than he expects, a larger rate hike may be needed. 'In that case, I believe the December meeting should consider a 50-basis-point rate increase,' he said. According to him, limiting the hike to 25 basis points in such a situation could put the central bank's credibility at risk. The combination of resilient hiring and persistent price pressure reinforced expectations of further monetary tightening, which pushed yields higher.