Treasury yields witnessed a secular rise in October. Except for yield on the one-month Treasury bill, which remained flat month-over-month, all other tenors saw a visible rise in yields. The rise in the intermediate (three-to-seven-year) Treasury note yields (IEF) was in the 12–20 basis point range. On the 30-year bond (TLT), the rise was 26 basis points.
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A firming-up on inflation expectations (TIP) was one of the main reasons for the rise in the yield curve, especially on the longer end. Speculation that the European Central Bank doesn’t have much room to increase its monthly purchases, presently at 80 billion euros, led to a rise in bond yields in Europe as well as the United States.
Corporate bond yields (LQD), as represented by BofA Merrill Lynch US Corporate Master Effective Yield, were in a tight range of 12 basis points throughout the month. The range of movement of high yield bond yields (HYG), as measured by BofA Merrill Lynch US High Yield Effective Yield, was wider at 26 basis points with yields hardening towards the end of the month.
According to CME FedWatch, there is only a 7.2% probability of a rate hike in the November meeting. However, with inflation expectations firming up, participants will look for the tone of the policy statement. US Presidential election results would also impact yield movement.