10-year Treasury yield tops 5.17% as hot producer prices put a Fed hike on the table
The 10-year Treasury yield rose to 5.17% on Friday after October producer prices rose 6.5% from a year earlier, the biggest annual jump since November 2022.
Yields stay above 5% after the inflation report
The 10-year Treasury yield rose 4 basis points to 5.143% on Friday, after reaching a high of 5.174% earlier in the day and staying over 5%, CNBC reported. The 2-year yield was lower by less than 1 basis point at 4.859%, while the 30-year yield rose more than 4 basis points to 5.472%. Yields and prices move in opposite directions, and one basis point equals 0.01%.
The move followed October's producer price index, which rose 0.3% from September, less than the 0.4% expected by economists polled by Dow Jones, but 6.5% over 12 months, the biggest annual increase since November 2022. Core producer prices, excluding food, energy and trade services, increased 0.5% in October.
"No silver lining" in the factory data
Chris Rupkey, chief economist at FWDBONDS, said there was "no silver lining" in the report, adding that "producer prices lead consumer prices and right now it looks like consumers will be on the hook for a fresh burst of factory inflation." The report landed a day after a sharp bond sell-off: on Thursday, the 10-year yield jumped more than 13 basis points to more than 5% and the 2-year soared more than 15 basis points.
The market's message is now about the Federal Reserve. Traders price a rate hike next month as a certainty, with 100% odds of a rise at the December 9 meeting, per the CME Group's FedWatch tool, and 89% odds of a 25-basis-point hike. Reuters reported investors now see a 14.5% chance of a jumbo 50-basis-point Fed hike in December, up from 0% a week ago, according to the CME FedWatch tool.
- 10-year yield5.143%, high of 5.174%
- 30-year yield5.472%
- 2-year yield4.859%
- Producer prices, Octoberup 0.3% from September
- Producer prices, year over yearup 6.5%, biggest since November 2022
- Core producer pricesup 0.5% in October
- Odds of a Fed hike on December 9100%, with 89% odds of a 25-basis-point hike
- WTI crude, December delivery$88.56, down 0.2%
What higher yields mean for stocks and oil
Higher yields are the backdrop to this week's stock market slide, and they punish the debt-heavy companies that borrowed to fund the AI buildout. Oil was steadier: U.S. West Texas Intermediate futures for December delivery were down 0.2% at $88.56 per barrel, posting a second weekly decline as prospects of renewed U.S. strikes against Iran fade, while Brent crude was higher by 0.02% at $95.84.
The next data point that matters is consumer inflation, which will show whether the factory price pressure Rupkey flagged is already reaching households. Until then, the bond market has made its view plain: inflation is running hot enough that the Fed is expected to raise rates in December, not cut them.
