10-year Treasury yield tops 5% as hot CPI fuels Fed hike bets
The 10-year Treasury yield climbed above 5% on Thursday as hotter-than-expected October inflation and rising oil prices pushed traders to price in a December Fed rate hike with certainty.
Yields jump across the curve
U.S. Treasury yields jumped on Thursday, sending the 10-year note above 5% alongside a move higher in oil prices and expectations of further Federal Reserve hikes, according to CNBC. The 10-year yield rose more than 7 basis points to 5.068%, the 2-year jumped more than 11 basis points to 4.843%, and the 30-year rose more than 5 basis points to 5.40%.
The move extended a sharp repricing that began on Tuesday, when the 2-year yield jumped about 18 basis points to 4.73% in its biggest one-day rise since April 2025, and the 10-year first climbed above 5%. One basis point equals 0.01%, and yields move inversely to bond prices. The 10-year is the benchmark for mortgages, auto loans and credit card debt, while the 2-year is more sensitive to short-term Fed decisions.
Hot inflation changed the Fed math
The trigger was Tuesday's hotter-than-expected consumer price index: U.S. consumer prices rose 0.4% in October, against 0.3% expected, with core CPI up 0.3% for a third straight month, according to the Bureau of Labor Statistics. No annual inflation rate was published because a federal shutdown last October prevented collecting year-over-year data.
Hours before the report, Fed Governor Christopher Waller said a 50-basis-point December hike should be considered if October core inflation came in near 0.3% or higher. It did. Traders now price 100% odds of a December increase, with the chance of a half-point move at about 13%, according to CME Group's FedWatch tool. Goldman Sachs added another hike to its forecast on Wednesday, now expecting an additional quarter-point increase in March. Dallas Fed President Lorie Logan has backed at least two more quarter-point increases. The Fed held its benchmark rate at 3.75% to 4% on October 27 to 28, and its final meeting of the year runs December 8 to 9, with the decision on December 9.
- 10-year yield5.068%, up more than 7 basis points
- 2-year yield4.843%, up more than 11 basis points
- 30-year yield5.40%, up more than 5 basis points
- October CPI+0.4% vs +0.3% expected
- December hike odds100%; half-point move about 13%
Oil adds to the pressure
Thursday's selloff accelerated after President Donald Trump said the United States does not need a deal with Iran, dashing hopes for an end to the war in the Middle East. The comments pushed oil higher, supporting the prospect of further rate rises: West Texas Intermediate gained 0.4% to $86.86 a barrel, while Brent crude was ahead about 1% at $93.60, according to CNBC.
The next test comes on Friday, when the October producer price index, which tracks wholesale prices, is expected to show a 0.4% rise, down from the 1.3% surge in September. The 10-year German Bund yield rose 1.3 basis points to 3.327%, and the 10-year U.K. gilt yield rose 5.6 basis points to 5.281%, as the bond selloff spread.
Housing feels the squeeze
Higher yields are already biting where it hurts most. October's existing home sales report from the National Association of Realtors showed sales reached their lowest level in more than 16 years, and the 30-year mortgage rate stood at 7.18%, against 6.22% a year ago.
Chris Rupkey, chief economist at FWDBONDS, said Fed officials want to push rates even higher to fight inflation, but that is pushing the housing correction deeper, with few homebuyers to be found. With the Fed's December 9 decision still weeks away, bond markets face more tests from Friday's producer prices and the Fed's preferred inflation gauge, the PCE index, later in November.
