Bonds reel as hot inflation fuels jumbo Fed hike fears

Global bonds plummeted as US inflation soared and Federal Reserve officials signaled a potential half-point rate hike next month. Data revealed October's core US inflation rate increased to 0.3 percent, surpassing expectations. Fed Governor Christopher Waller hinted that a 0.3 percent reading could prompt a 50-basis-point hike at the December meeting, while Dallas Fed President Lorie Logan and Chicago Fed President Austan Goolsbee suggested two more rate increases may be necessary.

Fed funds futures suggest a quarter-point hike is almost certain, with a 10 percent probability of a 50-basis-point rise by mid-2025. Two-year Treasury yields jumped 18 basis points, while Asian bonds suffered, with Japan's 10-year government bond yield climbing 7 basis points and Australia's rising 6 basis points. Despite Waller's comments, analysts anticipate further rate hikes in December and March 2027, potentially pushing the funds rate to 4.25-4.5 percent.

In Asia, MSCI's Asia-Pacific index still rose 0.2 percent, unlike Wall Street's decline. SoftBank Group's shares fell 3.3 percent after reporting a $7 billion quarterly loss. European and US stock futures rebounded, while Nvidia shares dropped 5.5 percent amid speculation of a foreign intelligence operation targeting CEO Jensen Huang.

Anthropic continued its AI boom listing, aiming for a $1.4 trillion valuation. The stronger US dollar boosted the Australian dollar's decline and drove gold prices down 2.6 percent.