US Treasuries: CPI shock fuels yield surge – Deutsche Bank

Deutsche Bank strategists explain that an upside surprise in US core and headline CPI, combined with hawkish comments from Fed officials, triggered a sharp selloff in US Treasuries. Two-year yields saw their biggest daily jump since 2025, while 10-year yields approached 5%. Market pricing now reflects a more extended and aggressive Fed hiking cycle into 2027.

Hawkish repricing across curve

"That US CPI print drove the biggest moves of the day, with the monthly core CPI print for October above consensus at +0.30% (vs. +0.2% expected)."

"Moreover, it was the third consecutive month with core CPI at +0.3%, and if you take those three months together, the annualised pace for core CPI is running at +3.75%."

"That’s the fastest pace on that measure since April 2024, so it made it increasingly difficult to dismiss this as a blip."

"Meanwhile, the headline CPI numbers were faster still, with monthly headline CPI at +0.35% (vs. +0.3% expected), with the 3-month annualised pace at +5.72%."

"For markets, the clearest impact could be seen in US Treasuries, with yields surging across the curve."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)