TREASURIES — US yields jump then pull back, reflecting Fed's expected patience

6% expectation (Updates prices to late afternoon) By Sinéad Carew Oct 14 (Reuters) — US Treasuries rallied sharply on Wednesday afternoon, reversing an earlier selloff spurred by the latest hot inflation report and leaving yields on most maturities lower for the day. The turnaround highlighted an increasingly vigorous debate in the market, centering on accelerating consumer price data on the one hand and a string of comments from Federal Reserve officials on the other suggesting that the central bank is not in a rush to hike rates further to try to tame stubborn inflation. 4% in August. 4% increase in August.

After the data, yields on 2-year Treasuries climbed to their highest levels in more than two weeks, before pulling back from their session highs along with yields for longer-dated bonds. With the data showing that inflation was still well above the Fed's 2% target and moving in the wrong direction, many investors wagered that the central bank's next rate decision may be a closer call than previously thought and solidified bets on a December hike. On Wednesday morning, trader bets on the probability of a rate hike at the Fed's October 27-28 meeting rose to around 40% from just 22% ahead of the data.

But by late afternoon, bets for a hike this month fell back to about 33%, The change in hiking odds and bond yields likely had a lot to do with recent dovish comments from several Fed officials including New York Fed President John Williams and Federal Reserve Vice Chair Philip Jefferson, according to Molly Brooks, US rates strategist at TD Securities. "At this point 50/50 feels pretty fair in terms of October, given that the data is maybe telling you one thing and the Fed is kind of telling you the other side. At this point, markets are just trying to figure out exactly how to react and what we're actually going to see happen," said Brooks.

" The Fed's Vice Chair for Supervision Michelle Bowman said before the data release on Wednesday that the US central bank has time to wait and see how financial markets and the economy evolve after the last rate hike before deciding to take any more action. 9521%, its highest level since September 29. 3293% in morning trading. 521%, eying its fourth straight day of declines.

6277%. Shortly after the report, Mike Lorizio, head of US rates & mortgage trading at Manulife Investment Management, had said the "massive upside surprise to CPI" would impact the Fed's preferred inflation gauge, the personal consumption expenditures (PCE) price index. "It will take forecasts for PCE meaningfully further away from the Fed's 2% target for inflation. This would suggest that the Fed would need to remove some accommodation to properly address the price stability part of its dual mandate," he added.

5 basis points, after touching its flattest level since late September. 4% a year for the next decade. Late on Tuesday afternoon, Boston Federal Reserve President Susan Collins had said that she believed the US central bank will need to raise interest rates again before the end of this year to lower inflation. com)