U.S. Treasury Yields Hit 26-Month Highs on Inflation Surprise; 10-Year Hits 5.12%, Up 26bp This Week

According to the Financial Times on November 13, U.S. Treasury yields surged this week as inflation data surprised to the upside and Federal Reserve officials took a hawkish tone. The 10-year Treasury yield rose to 5.12% on Friday, up 26 basis points for the week and marking the largest weekly gain since Trump's tariff announcement in April 2025. The 2-year yield climbed 32 basis points to 4.85%, its biggest weekly jump since end-2024.

U.S. CPI rose 0.4% month-on-month in October, exceeding expectations. Markets have now fully priced in a 25 basis point rate hike by the Federal Reserve in December, with a small probability of a 50 basis point increase. A second consecutive rate hike is now expected in January 2027, compared to just a 10% probability a week ago; a third hike by June 2027 has also been fully priced in.

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