Yields Fall Across the Curve
On Thursday, Treasury yields moved lower while market participants looked ahead to further economic releases, a day after September's inflation report came in above forecasts. The 10-year benchmark yield slipped 9 basis points to 5.099%, and the 30-year bond yield lost more than 8 basis points to reach 5.439%. The 2-year note yield declined 6 basis points to 4.74%. A single basis point represents 0.01%, and bond yields and prices travel in opposite directions.[S1]
Wednesday's release of the September CPI showed a 0.6% monthly increase and a 3.7% annual rise, the Bureau of Labor Statistics reported. Dow Jones-polled economists had forecast 0.6% and 3.6%. Core inflation, stripping out food and energy, climbed 0.3% month over month and 2.6% year over year, versus projections of 0.2% and 2.5%. A strong reading had been anticipated given surging energy costs, with gasoline up 9.1% and responsible for half the headline gain; the energy index rose 5.2%.[S1]
Rate-Hike Odds Surge, Then Fade
Attention now turns to the producer price index, September retail sales and weekly initial jobless claims, all scheduled later in the day. These figures arrive roughly two weeks ahead of the central bank's next rate decision, and Deutsche Bank analysts noted that rate-hike speculation climbed following the release. In a Thursday note, the analysts said the probability spiked to an intraday high of 58% after the CPI data landed, remaining above the 50% threshold for about thirty minutes.[S1]
That move unwound rapidly, however, as worries about AI and tighter credit conditions took hold, leaving traders pricing just a 31% probability of a hike at the upcoming meeting, per the CME FedWatch Tool. Yields reversed as AI credit concerns overshadowed the elevated CPI figure, and the dollar shed its safe-haven appeal. Gold climbed roughly $40 while Treasury yields pulled back from their post-CPI peak. Asian equities fell as the hot U.S. inflation data weighed on AI shares. Bitcoin, ETH and XRP each lost 1% after the CPI print. Bitcoin ETF flows saw IBIT and FBTC withdraw $175.7 million on October 13 following a $681 million weekly outflow, with the 3.7% CPI testing a rebound. Silver futures sank 4% on MCX before the U.S. CPI, with climbing oil adding pressure.[S1][S2][S3][S4][S5][S6][S7]
