- The 10-year Treasury yield stayed above 5% on Friday after October’s producer price index came in slightly below forecasts, CNBC reported. The yield, the benchmark for mortgages, auto loans and credit-card rates, rose 4 basis points to 5.143% and reached a high of 5.174% earlier in the session.
- The 2-year yield, which is more sensitive to the Federal Reserve’s path, was lower by less than 1 basis point at 4.859%. The 30-year yield was more than 4 basis points higher at 5.472%. That left a 28-basis-point 2s/10s spread, by our calculation, with the curve still modestly upward-sloping.
- The moves follow a sharp backup on Thursday, when the 10-year yield jumped more than 13 basis points to more than 5% and the 2-year soared more than 15 basis points, CNBC said. Investors now see a December rate hike as a certainty: the CME Group’s FedWatch tool showed 100% odds of a rise at the Dec. 9 meeting, with 89% odds of a quarter-point increase and around 14% odds of a half-point move.
- October PPI rose 0.3% from September, less than the 0.4% expected by economists polled by Dow Jones, but was up 6.5% over the past 12 months, the biggest annual increase since November 2022. Chris Rupkey, chief economist at FWDBONDS, told CNBC there was “no silver lining,” noting that core PPI excluding food, energy and trade services increased 0.5% in October and that “producer prices lead consumer prices.”
What Happened?
Cash Treasurys were already starting from high levels after Thursday’s post-holiday jump, so Friday’s 4-basis-point rise in the 10-year, even after a slightly softer monthly PPI, shows the market is looking through the 0.3% headline to the 6.5% annual rate and to a Fed path that is now fully priced for a December hike. The 2-year’s slight dip, against a still-rising long end, is a modest flattening, not a flight to safety. Oil offered little offset: West Texas Intermediate was down 0.2% at $88.56 a barrel and Brent was barely higher at $95.84, as prospects of renewed U.S. strikes on Iran faded and crude posted a second weekly decline, CNBC said.
Why It Matters?
Yields above 5% on the 10-year keep financial conditions tight for housing, consumer credit and long-duration risk assets, including AI-infrastructure borrowers that have already seen credit spreads widen. A 100% probability of a December hike, with a non-trivial tail for 50 basis points, also leaves little room for the Fed to surprise to the dovish side unless next week’s data weaken sharply.
What’s Next?
The next policy signals are next week’s retail sales, import and export prices, housing starts and the Federal Open Market Committee minutes, ahead of the Dec. 8-9 meeting. Investors will watch whether the 10-year can stay above 5% and whether the 2-year starts rising again if equity volatility persists over the weekend and into Monday’s futures. Oil’s second weekly decline suggests the bond backup is about U.S. inflation and Fed pricing, not a fresh energy shock.
Affected Tickers and Coins: TLT, IEF, SHY, SPY
Source: CNBC
