US bonds under pressure: Fed considers unusually large rate move

详细摘要

Persistent inflation in the United States is triggering another selloff in the bond market. The yield on 10-year government bonds briefly rose back above 5 percent. At the same…

Persistent inflation in the United States is triggering another selloff in the bond market. The yield on 10-year government bonds briefly rose back above 5 percent. At the same time, the probability is increasing that the US Federal Reserve will raise rates more aggressively than usual in December.

The latest US inflation figures have unnerved international investors. On Tuesday, the yield on two-year US government bonds briefly climbed to 4.76 percent, the highest level in more than two years. Ten-year US Treasuries temporarily yielded more than 5 percent.

According to official figures, prices in the United States rose by 0.4 percent in October from the previous month, while economists had expected only 0.3 percent. Core inflation excluding energy and food also came in at 0.3 percent, slightly above forecasts of 0.2 percent.

The data are increasing pressure on the US central bank. On Tuesday in London, Fed Governor Christopher Waller explicitly raised the possibility of a 50-basis-point rate hike. Such a move would be the largest rate step since 2022. Waller had signaled a stronger tightening if monthly core inflation were once again to reach at least 0.3 percent. That is exactly the figure that has now been published. In his view, being too cautious could undermine the central bank's credibility.

However, in the futures markets, a 25-basis-point increase remains the most likely scenario. The probability is around 85 to 90 percent. A 50-basis-point rate move is still considered less likely. The Fed first raised its key rate in September for the first time in three years, by 25 basis points to a range of 3.75 to 4 percent. In October, it refrained from taking another step. The next decision is due on December 9.

Commerzbank economist Christoph Balz emphasizes that inflationary pressure in the United States remains high. "Not only gasoline prices have risen, prices have moved higher across the board." The core rate, which is important for the trend, remains too high and…

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