Treasury yields tumble after October CPI comes in weaker than expected

U.S. Treasury yields tumbled across the board on Thursday after the October consumer price index report, a key inflation measure, came in weaker than expected, signaling that price increases have possibly peaked.

The benchmark 10-year Treasury yield last plunged more than 32 basis points to 3.816%, falling below the psychological 4% level. The yield on the 2-year Treasury note fell 30 basis points to 4.328%.

Yields and prices have an inverted relationship. One basis point equals 0.01%.


The latest CPI report gave investors hope that inflation is now past its peak, lending confidence that the Federal Reserve's interest rate hikes are slowly working to tame high price increases. Stock futures rallied on the news.

"This confirms the Fed's own view they need more measured rate hikes now but this doesn't stop them," said Diane Swonk, chief economist at KPMG. " It just affirms their plan."

Swonk added that, from the Fed's perspective, the dip in inflation is welcome news but still not enough to stop further tightening. In November, the Fed raised rates by a another 75 basis points, its fourth consecutive three-quarter point increase, putting rates at their highest level since 2008.

"What I'm more concerned about is how rapidly you can compress the lags on this," she said. "We just don't know what's going on in crypto and where are the land mines that they could trigger in terms of the larger credit market tightening."

Cleveland Fed President Loretta Mester said in a speech Thursday said there's more work to do to tame inflation even with a better than expected CPI report.

Markets also continued to watch developments around U.S. midterm elections, as it was still unclear which party will control the U.S. Senate and House of Representatives. The outcome is likely to affect decisions around monetary policy and spending.

Bond markets will close on Friday for Veterans Day.   

— CNBC's Fred Imbert contributed to this report.