DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.

The 10 year Treasury yield remained above 5% on Friday after October producer price data showed wholesale prices rising slightly less than economists expected for the month. The benchmark yield climbed 5 basis points to more than 5.15%.

That yield is a key benchmark for mortgages, auto loans and credit card debt. Its latest advance extended a sharp move in Treasury yields from the previous trading session.

The 2 year Treasury note yield rose by less than 1 basis point to 4.872%. That maturity is typically more sensitive to Federal Reserve decisions involving interest rates over shorter periods.

At the longer end of the market, the 30 year Treasury bond yield increased by more than 5 basis points to 5.481%. The 30 year yield is sensitive to geopolitical risks.

One basis point equals 0.01%. Treasury yields and prices move in opposite directions, meaning higher yields accompany lower prices and lower yields accompany higher prices.

The October producer price index increased 0.3% from September. That monthly gain came in below the 0.4% forecast from economists polled by Dow Jones.

The annual reading offered a more forceful inflation signal. Producer prices rose 6.5% over the previous 12 months, marking the largest annual increase since November 2022.

Chris Rupkey, chief economist at FWDBONDS, said there was “no silver lining” in the inflation report. He also pointed to the increase in the core producer price measure.

Core producer prices, which exclude food, energy and trade services, rose 0.5% in October. That gain came despite the headline monthly producer price increase landing slightly below the Dow Jones estimate.

“It is economics 101 that producer prices lead consumer prices and right now it looks like consumers will be on the hook for a fresh burst of factory inflation,” Rupkey said.

Friday’s Treasury moves followed an even larger jump during Thursday’s session. The 10 year Treasury yield climbed more than 13 basis points that day and moved above the 5% threshold.

The 2 year Treasury yield also surged during Thursday trading, rising more than 15 basis points. By Friday, its move was much smaller, while longer term yields continued to climb by several basis points.

Investors now view a Federal Reserve rate increase next month as certain. Traders are pricing in 100% odds of an increase at the Dec. 9 meeting, according to the CME Group’s FedWatch tool.

The pricing showed an 86% probability that the Federal Reserve would raise rates by a quarter percentage point. The chance of a half point increase stood at around 14%.

Energy inflation remained another important part of the broader picture. Oil was headed for a second consecutive weekly decline as the prospects of renewed strikes by the U.S. against Iran faded.

Oil prices moved unevenly during early Friday trading. U.S. West Texas Intermediate futures for December delivery declined 0.1% to $88.63 per barrel.

Brent crude, the international oil benchmark, moved in the opposite direction. It gained 0.3% to $96.11 per barrel as traders assessed energy prices alongside producer inflation and the Treasury market’s sharp yield movements.

The combination of a 6.5% annual producer price increase and elevated Treasury yields came as traders prepared for the Dec. 9 Federal Reserve meeting. Market pricing heavily favored a quarter percentage point increase, while preserving a smaller chance of a half point move.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.