10-year Treasury yield tumbles below 4.5% on cool October inflation report

U.S. Treasury yields tumbled Tuesday as the latest inflation figures showed a dramatically slower pace of price increases last month.

The 10-year Treasury yield fell nearly 17 basis points to about 4.46%. The 2-year Treasury yield slid 21 basis points to 4.8%.

Yields and prices move in opposite directions and one basis point equals 0.01%.

The October consumer price index was unchanged month over month, and up 0.2% when excluding food and energy, 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 slowest 12-month inflation rate since September 2021, according to the report, a positive sign in the Federal Reserve’s campaign to bring price increases back to its 2% target without 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.

“We don’t want to see the wheels fall off the economy, but when all was said and done the Fed needs the economy to temper down here a little bit to take the inflation edge off,” said Gregory Faranello, head of U.S. rates strategy at AmeriVet Securities.

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.

“As long as the direction remains lower … unless the wheels come off the economy, I think markets are going to like it,” Faranello added.

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.

— CNBC’s Fred Imbert contributed reporting.