Treasury Yields Near Multiyear Highs After August CPI
The 10-year Treasury yield reached 4.97% Friday, marking its highest level since October 2023.
The 10-year Treasury yield reached 4.97% Friday, marking its highest level since October 2023. The 2-year note yield climbed to 4.628%, its peak since July 2024. Bond markets priced in a higher probability of a Federal Reserve rate hike. Traders at the Chicago Mercantile Exchange put the odds of a quarter-point increase at 86%. This figure rose from 72% on Thursday.
The Bureau of Labor Statistics reported that the consumer price index rose 0.4% in August. This lifted the 12-month inflation rate to 3.4%. Both monthly and annual figures matched consensus estimates. However, they remained above the Federal Reserve’s 2% target. Core inflation, which excludes food and energy, increased 0.3% for the month.
Core Inflation Exceeds Forecasts
Core CPI came in 0.1 percentage points higher than economist predictions. The annual core inflation rate stood at 2.4%. This aligned with Wall Street expectations. The report serves as the final major inflation data point before the Fed’s policy meeting. The meeting concludes next Wednesday with a vote on interest rates.
The Federal Reserve’s key interest rate currently stands between 3.50% and 3.75%. Investors now anticipate a move higher due to persistent inflation signals. The 30-year Treasury bond yield remained stable at 5.356%. This stability contrasts with the sharp rises in shorter-term yields.
Oil Prices Impact Market Sentiment
U.S. oil prices topped $100 per barrel on Thursday. This move followed further escalation in the Middle East. The spike contributed to the Treasury sell-off earlier in the week. West Texas Intermediate futures fell 2.4% to settle at $100.05 on Friday. Brent futures declined 2.8% to reach $104.61.
Treasury Department Conducts Bond Buyback
The Treasury Department purchased back approximately $5.2 billion in debt. This included off-the-run 10-year notes and 20-year bonds. The buyback represented roughly half of the $10.5 billion offered. Wholesale inflation data showed prices rose 0.4% in August. Core wholesale inflation increased 0.2%, coming in below the 0.3% forecast.
