Treasury yields spike as markets worry about the impact of sticky inflation on Fed policy

• The 10-year Treasury yield spiked about 12 basis points Thursday.
• The jump followed September CPI, which showed inflation is still elevated.

Treasury yields spiked on Thursday as investors worried about the September Consumer Price Index report, which showed the pace of disinflation stalling last month.

The 10-year Treasury yield jumped 12 basis points to hover at 4.714%, near the 16-year highs reached the week prior. The bond market has endured big swings in recent weeks and has seen a historic sell-off as investors recalibrate to the outlook for interest rates staying higher for longer.

Earlier in the week on Tuesday, the 10-year Treasury yield dropped 15 basis points in the steepest single-day decline since the implosion of Silicon Valley Bank in March.

September CPI showed prices rose 3.7% on an annualized basis in September, above the expected 3.6%, and the same level as August's reading.

Core CPI, which doesn't account for food and energy, also climbed, moving 4.1% higher compared to one year ago.

Following the report, CME fed fund futures show investors think there is a 31% chance the Fed raises rates at the December meeting, up from 14% on Wednesday.

"As it pertains to Fed policy, today's CPI data doesn't provide additional impetus for the Fed to act at the upcoming November 1 meeting," said Charlie Ripley, senior investment strategist for Allianz Investment Management. "Overall, consumer price data continues to be on track to moving towards the Fed's stated two-percent target, but it's likely we will continue to see some bumps along the way like the small upside surprise today."

Also weighing on long-dated yields was a tepid reception to the latest auction of 30-year bonds by the government. The Treasury sold $20 billion of 30-year notes at 4.837%, the highest level since 2007. According to the Wall Street Journal, weak demand from foreign buyers meant big banks ended up buying a larger chunk of the debt than they normally buy at government bond auctions.