US 10-year treasury yields sharpen losses to two-month trough after inflation data

US 10-year treasury yields declined on Wednesday for the third straight session to a two-month trough following US inflation data for October.

The report indicated that inflationary pressures have receded in the US, and bolstered the view that the current policy tightening cycle is already over. 

US Yields

US 10-year treasury yields tumbled 0.5% today, plumbing two-month lows at 4.428% and boosting non-yielding assets.

Such gains came after US consumer prices showed a sharp slowdown in October, all but confirming the end of the current policy tightening cycle.

US Inflation Data

In the US, consumer prices rose 3.2% y/y in October, slowing down from 3.7% in the previous reading, and below estimates of 3.3%.

Core prices, excluding food and energy, rose 4% y/y, down from 4.1% in the previous reading.

US Rates

Following the data, the odds for a US interest rate hike in December plunged to 1%.

Traders also now expect the Federal Reserve to enact its first interest rate cut in May 2024. 

Analysis 

Analysts now expect the Fed to change gear and focus on supporting the economy as inflation slows down considerably in line with targets.