10-year Treasury yield moves to 5.15% as traders weigh producer price report

The 10-year Treasury yield stayed over 5% on Friday after October's producer price index, a measure of wholesale prices, came in slightly less than expected.

The yield — the key benchmark for mortgages, auto loans and credit card debt — rose 5 basis points to more than 5.15%.

The 2-year Treasury note yield, typically more sensitive to short-term Federal Reserve interest rate decisions, was higher by less than 1 basis point, at 4.872%. The longer-dated 30-year Treasury bond yield, sensitive to geopolitical risks, was more than 5 basis points higher, at 5.481%.

One basis point equals 0.01%, and yields and prices move in opposite directions.

October's producer price index rose 0.3% versus September, less than the 0.4% expected by economists polled by Dow Jones. But on an annual basis, PPI rose 6.5% over the past 12 months, the biggest annual increase since November 2022.

There was "no silver lining" in the inflation report, said Chris Rupkey, chief economist at FWDBONDS, adding that core PPI — which excludes food, energy and trade services — increased 0.5% in October.

"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," he said.

The moves come after 10-year Treasury yields jumped more than 13 basis points to more than 5% in Thursday's session, with the 2-year yield soaring more than 15 basis points.

Investors now see a Federal Reserve rate hike next month as a certainty. Traders are pricing in 100% odds of a rise at the Dec. 9 meeting, according to the CME Group's FedWatch tool. Odds of a quarter percentage point hike now stand at 86%, with the chance of a half point increase at around 14%.

Energy inflation remains a key part of the puzzle, with oil set for its second weekly decline as prospects of renewed strikes by the U.S. against Iran fade. Prices were choppy in early trading Friday. U.S. West Texas Intermediate futures for December delivery were down 0.1% at $88.63 per barrel. Brent crude, the international oil benchmark, was higher by 0.3% at $96.11.