10-Year Treasury Yield Little Changed at 4.3%, Close to 3-Week Lows

The yield on the 10-year US Treasury note hovered near 5% during Thursday’s post-holiday session, holding onto gains from earlier in the week amid growing expectations of additional Federal Reserve rate hikes. The rise was fueled by stronger-than-expected October inflation data and increasingly hawkish signals from Fed policymakers. Fed Governor Christopher Waller indicated that a 50-basis-point increase in December could be justified, while Dallas Fed President Lorie Logan supported at least two more 25-basis-point hikes as inflationary pressures persist. Markets are currently pricing in approximately a 91% probability of a rate increase next month, with further tightening in January and potentially April also being considered. Investors are now awaiting Thursday’s initial jobless claims and existing home sales reports for further indications of inflationary trends, labor market conditions and the broader economic outlook.

The yield on the 10-year US Treasury rose past the 5% threshold, rebounding from near-two-month lows after hot inflation data consolidated bets that the Fed will deliver multiple additional rate hikes in the current cycle. Both headline and core consumer prices rose more than expected in October, adding to evidence that soaring energy prices are being transmitted into core sectors of a resilient economy. The data followed hawkish comments from Fed Governor Waller, who said he would support a 50bps increase in December if inflation continued to accelerate. Also, Dallas Fed President Logan supported at least two additional 25bps increases. Treasury yields of all maturities had already rebounded this week as markets regained risk sentiment following a brief flight to safety after the Democratic Party gained control of Congress, driving markets to reconsider advances in the tech sector that has carried investment in the US economy. US bond markets will be closed on Wednesday for a holiday.

The yield on the US 10-year Treasury note was little changed around 4.88% on Tuesday, holding near two-month lows as investors awaited the October CPI report, with both headline and core inflation expected to ease amid stabilizing energy prices. Richmond Fed President Tom Barkin said on Monday that the Federal Reserve should approach monetary policy adjustments “with care,” as persistent inflation remains its primary concern. Markets are currently pricing in an 84% probability of a Fed rate hike in December, up considerably from approximately 74% a week earlier following last week’s stronger-than-expected employment data. Meanwhile, inflationary concerns eased as oil prices extended their decline amid growing optimism over a potential US-Iran peace agreement. President Donald Trump expressed confidence that the conflict in Iran was nearing an end following discussions with Qatar’s prime minister.