The 10-year Treasury yield recently experienced its largest weekly decline in seven months, falling 14.6 basis points. This shift occurred despite a higher-than-expected annual inflation rate of 3.7%, which exceeded the projected 3.6%. Core CPI also rose by 2.6% annually, surpassing the anticipated 2.5%.
Jurrien Timmer, Director of Global Macro at Fidelity Investments, attributes the rise in yields to structural inflation and fiscal risks rather than just AI capital spending concerns. Following an October 14 report, the 10-year yield briefly reached 5.33% before retreating to below 5%.
Market expectations for a Federal Reserve rate hike at the October 27-28 meeting have shifted significantly. CME Group data shows the probability of a hike at 17.2%, down from 57.6% a month ago. However, New York Fed President John Williams and Bank of America economists maintain that another rate increase remains possible this year.
The 10-year breakeven rate, derived from inflation-protected Treasuries, was recorded at approximately 2.36% on Monday. This figure suggests an average annual inflation rate of about 2.4% over the next decade. These macroeconomic factors continue to influence market sentiment regarding stocks and crypto assets.
