US Treasuries are heading for their biggest weekly sell-off in more than 18 months after a jump in consumer prices. Investors who had bet a global bond rout was over were caught offside, and markets now fully price a Fed rate rise next month.
US Treasuries are on course for their biggest weekly sell-off in more than 18 months. A jump in inflation jolted investors who had piled into bets that a global bond rout was over.
The 10-year yield climbed as high as 5.17% on Friday. That is up 0.31 percentage points since the end of last week, the biggest weekly rise since the aftermath of President Donald Trump's "liberation day" tariffs in April last year.
Inflation data triggers the sell-off
Tuesday's figures showed consumer prices rising 0.4% in October, more than expected. The print cemented expectations of a further interest rate rise from the Federal Reserve this year.
Fund managers and traders said the move gathered momentum as investors who had piled back into bonds after a September sell-off were forced to rush for the exit. Matt Scott, global head of trading at AllianceBernstein, said the active management community had spent the past two weeks buying Treasuries, and that the last two or three days washed out those positions.
Short-term debt moved even more violently. Two-year yields rose 0.37 percentage points this week to 4.89% on Friday, the biggest rise since late 2024.
Fed officials fuel rate-rise bets
Markets now fully price in a quarter-point Fed rate rise next month, with an outside chance of a half-point increase. Fed policymaker Christopher Waller floated that prospect on Tuesday. According to the Financial Times, he said if inflation remained elevated: "hiking only 25 basis points would put our credibility at risk".
Another Fed official, Beth Hammack, said on Thursday that rates needed to rise to tackle inflation. A second consecutive increase in January was largely priced in on Friday, against odds of just 10% a week ago. A third rise by June next year is also fully priced in.
Stocks felt the pressure too. The S&P 500 was down 0.7% just after midday on Friday, while the Nasdaq 100 fell 1.6%.
Source: Financial Times
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