10-year Treasury yields dip as traders look ahead to Thursday economic reports

The yield on the 10-year Treasury note — the benchmark for mortgages, auto loans and credit card debt — slid 3 basis points to 5.187%. Earlier in the day, yields had climbed in reaction to a stronger-than-expected September consumer price index report.

The longer-dated 30-year U.S. Treasury yield — which tends to react most to geopolitical events — was down more than 4 basis points, to 5.52%.

The 2-year Treasury yield — which closely tracks the Fed’s interest rate decisions — gained less than 1 basis point, to 4.797% after earlier hitting its highest level since Sept. 29.

One basis point equals 0.01%, or 1/100th of 1%, and yields and prices move inversely.

On Thursday, investors will get the September reading for the producer price index, September retail sales data and weekly initial jobless claims figures. For PPI, economists polled by Dow Jones are expecting a 0.6% rise on the month and a 5.5% gain on the year.

The data will follow Wednesday’s September consumer price index report, which rose 3.7% year over year, higher than the Dow Jones consensus estimate of 3.6%. Core inflation, excluding food and energy prices, came in at 2.6% on an annualized basis, versus the 2.5% consensus estimate.

The latest inflation reading comes just two weeks before the Fed’s next interest rate decision.

With inflation remaining sticky, the central bank may need to raise rates higher and keep them there for longer in 2027, said Christopher Rupkey, chief economist at Fwdbonds.

“The bond bulls have turned around and are running the other way as 10-year yields have shot higher after today’s shocking inflation report,” he said. “Inflation is alive and the only way the Warsh Fed knows how to kill it is with another dose of higher rates.”

Odds for an October 28 quarter-point hike in the fed funds rate — currently 3.75% to 4.00% — increased to roughly 33% from just 22.1% a day ago, according to futures trading measured by CME’s FedWatch tool.

There is now about a 90% likelihood of at least one more rate hike before the year is out, and included in that is a 40% chance that rates are higher by a half-percentage point — double the odds seen just one day ago.

— With additional reporting by CNBC’s John Melloy.