10-Year Treasury Yield Holds Above 5% as Hot Inflation Locks In December Fed Rate Hike Bets

U.S. Treasury yields have surged back above key thresholds as hotter-than-expected inflation data and reduced forward guidance from Federal Reserve Chair Kevin Warsh leave bond traders pricing in near-certainty of a rate hike at the Dec. 9 policy meeting.
Following an October consumer price index print of 0.4%—one-tenth of a percentage point above consensus and the seventh consecutive month of prices outpacing wages—the 10-year Treasury yield jumped 14 basis points to 5% on Nov. 10 while the 2-year yield climbed 19 basis points. Strong employment figures, hawkish Fed commentary, and a $25 billion 30-year bond auction pushed the 10-year yield more than 13 basis points higher again on Nov. 12, keeping it above 5% after briefly reaching roughly 5.34% in October.
Money markets are pricing in a 90.5% probability of a 25-basis-point increase in December alongside a 9.5% chance of a 50-basis-point move. Fed Governor Christopher Waller warned that stopping at a quarter-point hike after hot inflation data would put the central bank’s credibility at risk, joining Dallas Fed President Lorie Logan and Cleveland Fed President Beth Hammack in signaling support for additional tightening. However, Macquarie’s Thierry Wizman maintained a single quarter-point hike as the base case, citing potential headwinds from a government shutdown, softer oil prices tied to U.S.-Iran diplomacy, or an AI-led equity pullback.
Meanwhile, energy and wholesale costs remain key inflation risks. Although crude oil headed for a second straight weekly decline following a ~13% drop the prior week, Middle East supply threats—including reported attacks on supertankers and Saudi pipeline infrastructure—continue to cloud the outlook, while September producer prices jumped 6.3% year-over-year, the fastest pace since 2022.
Higher Treasury yields also threaten to reverse a brief dip in borrowing costs. While the average 30-year fixed mortgage rate eased to 7.11% for the week ending Nov. 12, Fannie Mae projects rates to average 7.4% in the fourth quarter and 7.5% through 2027, adding pressure to a housing market where pending home sales hit a record low in September.