US Treasury yields rose on Thursday, October 12, 2023, as investors weighed fresh economic data from the Consumer Price Index (CPI) report pointing to stubbornly high inflation. This index for the evaluation period of September 2023 thus showed a month-on-month increase of +0.4% and an increase of 3.7% year-on-year. Although these data were in line with the expected increase in inflation, they still exceeded the estimates of the most pessimistic analysts by 0.1%.
Based on these results and after the publication of the data and the core CPI, which does not include food and energy prices in its calculation and showed a year-on-year inflation increase of +4.1 percent for September 2023, the majority of participants came to believe that the US central bankers within in the process of suppressing inflationary effects on the United States economy, the Federal Open Market Committee (FOMC) will proceed to further increase interest rates in the US at its meeting. The next meeting of this key FOMC committee of the Central Bank of the United States of America FED (Federal Reserve System) is scheduled to take place in less than three weeks at the turn of October and November of this year 2023, traditionally as a two-day meeting, on October 31. and 1/11/2023 in Washington, DC. Investors, traders and other participants in the financial markets, and especially bond market investors, reacted to these facts by increasing their interest in US government bonds, as they expect their incomes to increase further after the increase in interest rates.
During Thursday, October 12, 2023, the yields of US government bonds moved mainly in the business trend of a daily increase in their yields, and for example, the two-year US Bond showed a yield of the amount of 5.037% p.a. and the 10-year US Bonds were trading at the indicated date and time at their yield value of 4.656% per annum. Currently, during the European Friday morning on October 13, 2023, at approximately 7:24 CET, the two-year US bond was trading on the bond market with a yield of 5.039% p.a. and 10-year US Bonds showed a yield of 4.658% per annum in bond market trade. These returns were achieved when the exchange value of USD according to the dollar index DXY (US Dollar Currency Index) showed a daily point decrease of -0.19% of the point value and the DXY index was at a point level of 106.4 USD points. On the indicated day and time, the global currency pair EUR/USD was traded at the rate of 1.055 USD per EUR, with the daily strengthening of the EUR by + 0.20% against the USD.
The current CPI report, released on Thursday 10/12/2023, thus comes a day after hotter-than-expected wholesale price data and could inform the Federal Reserve’s (FED) next monetary policy decision, thereby influencing whether the US central bank will raise interest rates higher or not. The minutes of the last meeting of the Fed, which took place in September of this year 2023, the so-called FED minutes, were published on Wednesday, October 11, 2023, and indicated that non-members of the FOMC committee expect restrictive policies to remain in place until they are sure that inflation is heading back down to the target margin of 2%. However, monetary policymakers from the FED differed on whether further increases in interest rates would be needed to achieve this goal. That difference of opinion has also been reflected in comments from Fed spokesmen in recent weeks, with some leaving the door open to more rate hikes while others said they believed rates had been raised enough. However, financial strategists and most analysts of investment companies predict a further increase in interest rates in the US and thus an even stronger exchange value of the US dollar (USD) and probably higher US government bond yields.