On Wednesday, after an early ascent, treasuries reversed course throughout the trading day, ultimately retreating slightly. Bond prices retracted significantly from their initial highs, concluding the day with a modest decline. Consequently, the yield on the benchmark ten-year note, inversely related to its price, edged up by 1.9 basis points to reach 4.451 percent, following a drop to a low of 4.359 percent.
This increase builds upon the 12.4 basis point surge observed on Tuesday, marking the ten-year yield's highest closing level in over four months.
Initially, treasuries were buoyed by the release of critical consumer price inflation data that aligned with economist forecasts. The Labor Department reported that the consumer price index rose by 0.2 percent in October, consistent with the increments recorded over the past three months and in line with expectations.
Moreover, the report highlighted an acceleration in the annual consumer price growth rate to 2.6 percent in October, up from 2.4 percent in September, again meeting economist projections.
Core consumer prices, excluding food and energy, increased by 0.3 percent in October, mirroring the rises of the previous two months and aligning with expectations. The annual rate of core consumer price growth remained steady at 3.3 percent, consistent with the previous month and predicted figures.
Although this data bolsters confidence in the Federal Reserve's expected continuance in lowering interest rates next month, the persistence of inflation creates ambiguity regarding further rate cuts.
"The anticipated year-over-year figure of 2.6% may still cause the Federal Reserve to hesitate in formally declaring the end of its inflation-reduction initiatives," commented Quincy Krosby, Chief Global Strategist for LPL Financial.
Currently, the CME Group's FedWatch Tool suggests an 82.3 percent probability of an additional quarter-point rate cut in December, alongside a 60.2 percent likelihood of rates remaining unchanged in January.
Attention is likely to be drawn Thursday to reports on producer price inflation and weekly jobless claims, in addition to remarks by Federal Reserve Chair Jerome Powell.
