US inflation and Fed signals rattle bond markets

Global bonds tumbled and the dollar firmed after a hotter-than-expected US inflation reading and hawkish Fed comments raised the risk of a half-point rate hike in December, though stocks remained resilient. Core US inflation ran at 0.3% monthly in October, above the 0.2% forecast. Fed Governor Christopher Waller said such a reading would prompt him to consider a 50-basis-point hike, with other officials also signaling more tightening. Fed funds futures now price a 10% chance of a jumbo move. Two-year Treasury yields surged 18 basis points overnight, with Asian bonds sold off. Goldman Sachs expects a second 25bp hike in December but added a third for March 2027, peaking rates at 4.25-4.5%. The dollar gained 0.5%, gold slid 2.6%, and oil rebounded on hopes for Iran war resolution.