On Wednesday, U.S. ten-year Treasury yields briefly touched a peak of 4.86%, driven by rising oil prices and tensions in the Middle East, before settling at around 4.83%, according to data from the CME FedWatch tool. This surge comes amid persistent inflation and strong retail sales reports that indicate the Federal Reserve might sustain higher interest rates for a longer period than previously expected.
The market currently predicts a 90% probability of maintaining interest rates between 5.25% and 5.50% after November's meeting, as suggested by the 30-day Fed Funds futures data. The possibility of a rate hike in December stands at 38%. Nationwide Economics highlighted that robust employment and income growth have fueled consumer spending, thereby supporting the need for a more restrictive monetary policy.
Meanwhile, Japan's ten-year bond yield reached a decade-high of 0.815%, which led to unscheduled bond purchases by the Bank of Japan. In contrast, the U.S. Treasury has announced plans for a $13 billion 20-year bond auction.
This financial activity coincides with the release of data on September's housing starts and building permits, as well as the Fed Beige Book. Statements are also expected from several Fed officials, including Governor Chris Waller, New York Fed President John Williams, Richmond Fed President Tom Barkin, and Philadelphia Fed President Patrick Harker.
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