REUTERS/Brendan McDermid
- The 10-year Treasury yield spiked about 12 basis points Thursday.
- The jump followed September CPI, which showed inflation is still elevated.
- Bond yields edged back up toward 16-year highs reached a week ago.
Treasury yields spiked on Thursday as investors worried about the September Consumer Price Index report, which showed the pace of disinflation stalling last month.
The 10-year Treasury yield jumped 12 basis points to hover at 4.714%, near the 16-year highs reached the week prior. The bond market has endured big swings in recent weeks and has seen a historic sell-off as investors recalibrate to the outlook for interest rates staying higher for longer.
Earlier in the week on Tuesday, the 10-year Treasury yield dropped 15 basis points in the steepest single-day decline since the implosion of Silicon Valley Bank in March.
September CPI showed prices rose 3.7% on an annualized basis in September, above the expected 3.6%, and the same level as August's reading.
Core CPI, which doesn't account for food and energy, also climbed, moving 4.1% higher compared to one year ago.
Following the report, CME fed fund futures show investors think there is a 31% chance the Fed raises rates at the December meeting, up from 14% on Wednesday.
"As it pertains to Fed policy, today's CPI data doesn't provide additional impetus for the Fed to act at the upcoming November 1 meeting," said Charlie Ripley, senior investment strategist for Allianz Investment Management. "Overall, consumer price data continues to be on track to moving towards the Fed's stated two-percent target, but it's likely we will continue to see some bumps along the way like the small upside surprise today."
Also weighing on long-dated yields was a tepid reception to the latest auction of 30-year bonds by the government. The Treasury sold $20 billion of 30-year notes at 4.837%, the highest level since 2007. According to the Wall Street Journal, weak demand from foreign buyers meant big banks ended up buying a larger chunk of the debt than they normally buy at government bond auctions.