Treasury yields skyrocketed Tuesday as investors bet that high inflation will keep the Federal Reserve aggressive as it tightens monetary policy.
The 10-year Treasury benchmark yield rose 7 basis points and traded at 3.435%. The yield on the 30-year government bond increased by about 4 basis points to 3.558 %.
Meanwhile, the 2-year Treasury yield, the part of the curve most sensitive to Fed policy, rose 17 basis points to 3.735%, reaching its highest level since November 2007. Yields move inversely to prices , and one basis point is equal to 0.01%.Read:What we wished we’d known about buying a new-build house
The consumer price index rose 0.1% for the month and 8.3% over the past year. Economists had expected headline inflation to fall 0.1% month over month, according to Dow Jones estimates. The year-over-year estimate was 8%.
Energy prices fell 5% this month, led by a 10.6% decline in the gasoline index. However, those declines were offset by increases elsewhere.
“We saw this tug-of-war between goods moderation and services continue to be strong. This isn’t a tug-of-war. They’ve both gone up,” said Nomura economist Rob Dent. “Right now I think the Fed will look at this with a lot of concern. This is not good news in this report,” he said.
After the hot inflation poll, markets estimate a 100% chance that the Federal Reserve will raise interest rates by 75 basis points for the third time next week, according to the CME FedWatch tool.Read:Companies House is dysfunctional and facilitating fraud, MPs told | Business
— CNBC’s Patti Domm and Natasha Turak reported.