Yields climbed through the session and finished at fresh highs for the month, with the 10-year closing at 4.98% and the 50-day moving average at 5.041% sitting just above it. 

A day of Fed talk, red-hot CPI and weak auctions

Treasuries opened lower after Fed Governor Waller said in London that he supports a 25-basis-point hike in December and left the door open to something larger if inflation stays hot. 

A few hours later, October CPI came in hotter than expected, and selling picked up. 

Boston Fed President Logan, who is an FOMC voter this year but won’t be one in 2027, said two 25-basis-point hikes should be implemented. 

Treasuries hit their lows in the early afternoon and saw only a shallow bounce late in the day.

Yield check

The front end led the move, which is what you’d expect when the market is repricing the Fed.

The data

CPI: Total CPI rose 0.4% in October against 0.3% expected, and core CPI rose 0.3% against 0.2% expected. The BLS didn’t provide a year-over-year reading because of missing data from last October’s government shutdown.

NFIB: The Small Business Optimism Index slipped to 97.8 from 97.9, a hair below the 97.9 consensus.

10-year auction: The $42 billion sale priced at a 5.020% high yield, against a 4.425% average of the prior 12 auctions. Bid-to-cover was 2.46 against 2.53, indirect bidders took 61.2% against 71.4%, and direct bidders took 29.0% against 19.7%.

Other markets

Commodities: WTI crude fell 0.9% to $86.11 a barrel, gold fell 2.1% to $4,030.80 an ounce and copper fell 1.9% to $6.23 a pound.

Dollar: The U.S. Dollar Index rose 0.6% to 102.22, reclaiming Monday’s loss.

Currencies: EUR/USD fell 0.5% to 1.1162 and GBP/USD fell 0.7% to 1.3344. USD/JPY rose 0.6% to 158.81 and USD/CNH rose 0.1% to 6.6773.

Around the world

Japan: September household spending fell 2.8% month over month, well below the 0.3% gain expected, and the current account was weaker than expected. The Bank of Japan’s October meeting summary showed diverging views, adding some uncertainty about a December hike.

China: The October trade surplus was $105.28 billion against $126.50 billion expected. Exports rose 35.2% year over year and imports rose 41.6%, both above forecasts.

Other central banks: RBNZ’s chief economist said domestic inflation is still too high, and the Bank of France expects moderate Q4 growth without a recession.

Bottom line

It was a tough day for Treasuries, with hot inflation, hawkish Fed comments and weak auctions all pointing the same way. Yields finished at their highest levels of the month. The 10-year is only a few basis points below its 50-day moving average, which traders will be watching.

Looking ahead

The bond market is closed Wednesday for Veterans Day. Thursday brings a $25 billion 30-year bond auction to finish the week’s slate, and the weekly MBA Mortgage Index comes out at 7:00 a.m. ET Wednesday.