Treasury yields rose on Thursday as investors reacted to a hotter than expected rise in consumer prices.
The yield on the 2-year Treasury note jumped 19 basis points to 4.476% at 4:00 p.m ET Thursday . The 10-year Treasury yield rose roughly six basis points to 3.958%. Yields and prices move in opposite directions. One basis point equals 0.01%
The yields were off the highs of the session in midday trading. The 10-year yield surged as high as 4.08% in the aftermath of the inflation report.
The consumer price index rose 0.4% in September, above the 0.3% expected by economists according to Dow Jones. On a year over year basis, inflation was up 8.2%.
Core CPI, which strips out food and energy, was up 0.6% month over month, also higher than expected.
Markets are looking at the data for hints about future Federal Reserve policy, as some investors fear rates are being hiked too quickly and the central bank is dragging the U.S. economy into a recession.
Fed speakers have struck a hawkish tone ahead of their next meeting on Nov. 1 and 2 and have said they are not satisfied with recent inflation figures. Analysts are therefore broadly expecting another 75 basis point hike to be implemented next month, a view likely reinforced by the CPI report.
"The pace of inflation remains stubbornly high, in defiance of the Fed's attempts to tamp down the economy by tightening monetary policy. Rising prices, combined with last month's stronger than expected jobs report, all but guarantee the Fed will enact its fourth 0.75% rate hike when officials next meet in November," said Richard Flynn, managing director of Charles Schwab UK.
The consumer prices report follows Wednesday's stronger-than-expected producer price index inflation reading. Headline PPI, which reflects the wholesale price of goods, increased by 0.4%, rather than the 0.2% predicted by Dow Jones' economists survey.