BlockBeats news, on October 15, during overnight U.S. trading, U.S. Treasury prices rebounded sharply, reversing the previous sell-off triggered by higher inflation data, with yields on most maturities turning lower. This highlights the market's balancing act between two scenarios: rapidly accelerating consumer price data versus signals from Federal Reserve officials that they are not in a hurry to raise rates further.
U.S. official data showed that the U.S. CPI in September rose +3.7% year-over-year, exceeding the market expectation of +3.6%. Following the data release, the 2-year U.S. Treasury yield rose to its highest level in over two weeks, before subsequently declining from its intraday high alongside longer-dated yields. Meanwhile, traders’ odds of a Fed rate hike in October increased from 22% before the data release to around 40%; as of this writing, the probability has retreated to 33%.
Brooks, U.S. interest rate strategist at TD Securities, said that the changing probabilities of rate hikes and bond yields are likely closely tied to recent dovish remarks by several officials, including New York Fed President Williams and Fed Vice Chair Jefferson. Brooks noted that, for now, a 50/50 chance of a rate hike in October seems quite reasonable, as data may be sending one signal while the Fed is sending another.