Key facts
- The 10-year US Treasury yield rose to 5.31% following a September consumer inflation report.
- Consumer prices increased at a 3.7% annualized pace in September, exceeding economists' expectations.
- Stocks also fell after the inflation data was released.
- President Trump has consistently advocated for lower interest rates and made affordability a key campaign theme.
- The US Treasury announced a $6 billion bond buyback plan in September to add liquidity and calm yields.
The 10-year US Treasury yield is spiking again this week, influenced by a hotter-than-expected September inflation report, which could hobble President Donald Trump's goal of making life more affordable ahead of the midterm elections. The yield on the 10-year Treasury, a benchmark for many loan types, jumped as much as 9 basis points to 5.31%, near its highest level since 2002.
Consumer prices rose at a 3.7% annualized pace in September, slightly above the 3.6% growth economists had predicted and higher than the 3.4% recorded in August. Following the inflation data, stocks also fell, with the S&P 500 down 0.6%, the Dow Jones Industrial Average down 0.006%, and the Nasdaq 100 down 1% around 10:30 a.m. ET.
Concerns about the US's fiscal stability and inflation expectations have driven investors to sell Treasurys, pushing yields up. Investors are now pricing in a 96% chance the Federal Reserve will hike rates at least once more this year, and a 50% chance of two hikes, according to the CME FedWatch tool.
This situation presents a challenge for Trump, who has made lower interest rates a central theme, pressuring the Federal Reserve and floating ideas like a 50-year mortgage and interest rate caps. Higher rates threaten economic growth, a key talking point for Trump, who has been touting the US economy's resilience. The midterm elections, just weeks away, are seen by Democrats as a potential referendum on Republican economic policies and their impact on Americans' finances.
Trump has repeatedly voiced his desire for lower borrowing costs, urging the Fed to lower rates and suggesting rates should be capped at 1%. He has also expressed concern over the bond sell-off, though he stated it was not a factor in his decision to pause tariffs. The US Treasury announced a $6 billion bond buyback plan in September to inject liquidity into the bond market and help stabilize yields.