US Markets
Tuesday, November 14th, 2023 2:50 pm EDT
Key Points
- Treasury Yields Decline Significantly: U.S. Treasury yields experienced a notable decline on Tuesday, with the 10-year Treasury yield falling by nearly 18 basis points to approximately 4.45%, and the 2-year Treasury yield dropping over 19 basis points to under 4.9%. The inverse relationship between yields and prices is highlighted, where a basis point represents a 0.01% change. This significant movement is attributed to key inflation figures that revealed an unexpectedly soft change in prices for the previous month.
- Flat October Consumer Price Index (CPI) and Implications for Interest Rates: The October consumer price index was reported as flat month over month, and a 0.2% increase when excluding food and energy for the core CPI reading, according to the Labor Department. This defied expectations, as economists surveyed by Dow Jones had anticipated a 0.1% monthly rise in CPI and a 0.3% increase in core CPI. The year-over-year core CPI increase was 4.0%, marking the lowest 12-month reading since September 2021. This is considered a positive sign for the Federal Reserve’s efforts to slow inflation without causing a recession. The article emphasizes that this report is a key data point influencing speculations about the future of interest rates.
- Market Response and Speculation on Central Bank Actions: Following the release of the inflation figures, the options market implied a 0% chance of a rate hike in December and a negligible 4.1% chance for a January hike, as per the CME FedWatch Tool. The article underscores the growing uncertainty about the central bank’s future actions, with questions emerging about whether the Federal Reserve will further raise rates or prepare for cuts. This speculation has intensified in recent weeks, and various Fed officials are expected to make remarks on Tuesday, potentially providing investors with clues about the central bank’s next moves. The recent decision to leave rates unchanged, coupled with Fed Chairman Jerome Powell’s reiteration of the 2% inflation target, adds to the complexity of forecasting future interest rate changes. Additionally, the article mentions the forthcoming release of Eurozone Gross Domestic Product (GDP) data for the third quarter, which could offer insights into the economic state of the single currency area.
U.S. Treasury yields experienced a notable decline on Tuesday following the release of key inflation figures, indicating a surprising softness in price changes for the previous month. The 10-year Treasury yield dropped by almost 18 basis points to approximately 4.45%, while the 2-year Treasury yield fell over 19 basis points to under 4.9%. This inverse relationship between yields and prices is crucial in financial markets.
The October consumer price index (CPI) reported a flat month-over-month change, and a 0.2% increase when excluding food and energy for the core CPI reading, according to the Labor Department. Economists surveyed by Dow Jones had anticipated a 0.1% monthly rise in CPI and a 0.3% increase in core CPI. Notably, the year-over-year core CPI increase was 4.0%, marking the lowest 12-month reading since September 2021. This is seen as a positive sign for the Federal Reserve’s efforts to curb inflation without causing a recession.
The report is considered a crucial data point influencing speculation about future interest rates. With questions arising about whether the central bank will further raise rates or prepare for cuts, the market response implied a 0% chance of a rate hike in December and a minimal 4.1% chance for a January hike, as per the CME FedWatch Tool. Following the recent Federal Reserve meeting, where rates were left unchanged, Chairman Jerome Powell reiterated the Fed’s commitment to the 2% inflation target.
The options market’s response aligns with growing uncertainty about the central bank’s future actions. Various Fed officials are expected to make statements on Tuesday, providing investors with potential clues about the bank’s next moves. Additionally, the article mentions the upcoming release of Eurozone Gross Domestic Product (GDP) data for the third quarter, which could offer insights into the economic state of the single currency area.
For the full original article on CNBC, please click here: https://www.cnbc.com/2023/11/14/us-treasury-yields-investors-look-to-key-inflation-data.html
