U.S. Treasury yields rise as markets await October CPI data

U.S. Treasury yields rise as markets await October CPI data
Yields climb before CPI

Bond markets are positioning for a fresh reading on U.S. inflation as investors assess whether price pressures are easing ahead of the Federal Reserve's next rate decision. The October consumer price index is due later Tuesday and, together with wholesale inflation figures expected Friday, could influence expectations for interest rates in December.

Highlights

  • U.S. 2-year Treasury yield rises over 6 basis points to 4.6136%, while 10-year yield increases 2 basis points to 4.882% ahead of October CPI data.
  • Economists expect October headline CPI to rise 0.3%, with core CPI up 0.2% and traders largely pricing in a 25 basis point Fed rate hike in December.
  • Brent crude drops below $90 a barrel for the first time since August amid Middle East de-escalation signals, impacting market sentiment.

Inflation data and rate expectations

As reported by CNBC, U.S. Treasury yields move higher early Tuesday before closely watched consumer price index data for October due later in the session.

The yield on the 2-year Treasury note, which more closely tracks short-term Federal Reserve rate expectations, rises more than 6 basis points to 4.6136%. The 10-year Treasury yield, a benchmark for mortgages, car loans and credit card rates, is up 2 basis points at 4.882%, while the 30-year Treasury bond yield is broadly flat at 5.261%.

Economists polled by Reuters expect the headline CPI reading to rise 0.3% in October, with year-on-year growth slowing from 0.6% in September. Core consumer prices, which exclude food and energy, are expected to increase 0.2%, below the 0.3% rise recorded in September.

Traders are looking for signs that inflationary pressure in the U.S. economy is cooling. The CPI report is due at 8:30 a.m. ET, and markets have already largely priced in a 25 basis point rate increase in December, according to CME Group's FedWatch tool.

Oil prices and broader market signals

Energy markets are also shaping sentiment, with Brent crude falling below $90 a barrel on Tuesday morning for the first time since August. The move follows comments from President Donald Trump that the war with Iran could end "fairly soon" as he downplays the prospect of further strikes in the region.

Investors are also weighing last week's stronger-than-expected U.S. labor market data. The economy adds 165,000 jobs in October, more than double Wall Street forecasts, reinforcing the view that the Federal Reserve may keep a tightening bias even if inflation shows signs of moderating.

Earlier, we outlined UBS’s longer-term view on the Fed’s path in its rate-hike outlook.

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