Yields soar on hot inflation print. Treasury yields surged across the curve today, driven by hotter-than-expected CPI data and hawkish comments by Fed officials. The 2-year yield rose 20 bps intraday for the largest single-session increase since 2024, before closing 18 bps higher at 4.74%. The 10-year yield closed 11 bps higher at 4.99%. Meanwhile, equities edged lower on the inflation report and Nvidia headlines, with the S&P 500 and NASDAQ closing 0.38% and 0.74% lower, respectively.
CPI surprise shows persistent inflation. The Consumer Price Index rose 0.4% MoM in October, above expectations of 0.3% and the third straight monthly gain of at least 0.4%, despite cooling from 0.6% the month before. Core CPI, which excludes food and energy, also topped forecasts, rising 0.3% MoM versus the 0.2% expected. Brian Jacobson, chief economic strategist at Annex Wealth Management, said, “It’s not just headline CPI that is too high, but the oil shock has seeped into core.” The BLS did not release YoY figures due to the October 2025 government shutdown, however, on a three-month annualized basis core CPI is up 3.75%, marking a two-year high. October price increases were broad-based across goods and services, with food prices increasing 0.5% after a flat September, driven by a record 5.1% surge in baby formula prices.
Waller leaves open possibility of 50 bp December hike. Fed Governor Waller said he would support a quarter-point hike at the December FOMC meeting but opened the door to “more robust action” should October inflation data land hotter than expected, as CPI did this morning. Waller said any data surprises would lead him to consider a half point hike, because “hiking only 25 basis points would put [Fed] credibility at risk.” Dallas Fed President Lorie Logan echoed the sentiment, saying, “the FOMC needs to implement at least two more 25-basis point rate increases,” and may need to act “more rapidly” in the coming months. Fed Governor Bowman similarly supports a quarter-point December hike, noting that “inflation pressures are persisting, while the labor market conditions appear to be firming,” adding there is “still work to do” to bring price pressures back toward 2%. Futures markets are now fully pricing in a 25 bp hike in December, up from 84% yesterday.
