Treasury Yields Soar After Hot CPI Report

The yield on the US 10-year Treasury note surged 9bps to 5.3% on Wednesday, approaching again highs last seen in early 2002, after the latest US inflation report came in hotter than expected. While higher energy prices were the main driver, the data also pointed to relatively broad-based inflationary pressures. Annual inflation accelerated to 3.7%, above forecasts of 3.6%, while the annual core inflation rate edged up to 2.6%, exceeding expectations of 2.5%. Monthly core CPI inflation also came in above forecasts of 0.3%. The report strengthened expectations of another Federal Reserve rate hike this month, with the probability of such a move rising to around 65%, up from approximately 22% before the release.