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U.S. Treasury yields fell on Tuesday as key inflation figures showed a surprisingly soft change in prices last month.
The 10-year Treasury yield fell 18 basis points to about 4.45%. The 2-year Treasury yield fell more than 20 basis points to under 4.9%.
Yields and prices move in opposite directions and one basis point equals 0.01%.
The October consumer price index was flat month over month, and up 0.2% when excluding food and energy for the so-called core CPI reading, the Labor Department said Tuesday.
Economists surveyed by Dow Jones were expecting a 0.1% monthly rise in CPI, and 0.3% in core CPI.
Core CPI was up 4.0% year over year, the lowest 12-month reading since September 2021, according to the report, a positive sign for the Federal Reserve’s efforts to slow inflation with causing a recession.
The report is a key data point for what could be on the horizon for interest rates. Questions around whether the central bank will hike rates further or prepare to cut them, and when that could happen have grown louder in recent weeks.
After the report, the options market implied a 0% chance of a rate hike in December, and a negligible 4.1% chance for a January hike, according to the CME FedWatch Tool.
When the central bank met earlier this month policymakers decided to leave rates unchanged, but did not take the option for further hikes off the table. Just last week, Fed Chairman Jerome Powell reiterated the Fed’s 2% inflation target.
Various Fed officials are also due to make remarks on Tuesday that could provide investors with clues about what the central bank may do next.
Elsewhere on Tuesday, euro zone gross domestic product data for the third quarter is expected and could provide insights into the single currency area’s economic state.
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