US Treasuries: CPI shock fuels yield surge – Deutsche Bank
Deutsche Bank strategists explain that an upside surprise in US core and headline CPI, combined with hawkish comments from Fed officials, triggered a sharp selloff in US Treasuries. Two-year yields saw their biggest daily jump since 2025, while 10-year yields approached 5%. Market pricing now reflects a more extended and aggressive Fed hiking cycle into 2027.
Deutsche Bank strategists reveal that a higher-than-expected increase in US core and headline CPI, along with assertive remarks from Fed officials, led to a significant decline in US Treasuries. The two-year yields experienced their largest single-day increase since 2025, while the 10-year yields edged closer to 5%. The market now anticipates a longer and more forceful Fed rate hike cycle extending into 2027, sparking from the US CPI report.
This data marked the most substantial moves of the day, with the October core CPI print exceeding expectations at +0.30% (compared to the forecasted +0.2%). Moreover, the core CPI for three consecutive months stood at +0.3%, translating to an annualized rate of +3.75%, the highest on record since April 2024. The headline CPI figures were even more pronounced, with monthly headline CPI at +0.35% (vs. +0.3% expected), with a 3-month annualized pace of +5.72%. The most apparent outcome for markets was a surge in US Treasuries yields across the curve.
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