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NEW YORK — U.S. Treasury yields fell

on Tuesday after data showed that inflation rose less than

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expected in October and as reports that Russian missiles hit

Poland raised fears about greater geopolitical risks in the

region.

Benchmark 10-year yields hit almost six-week lows after U.S.

producer prices increased at an annual rate of 8.0%, missing

economists expectations of an 8.3% rise.

It comes after a smaller-than-expected gain in the October’s

consumer price index on Thursday sent yields sharply lower on

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expectations that inflation may have peaked, which could open

the door to more dovish Federal Reserve policy if price

pressures continue to moderate.

“It seems to compound on the downside surprise to CPI,” said

Zachary Griffiths, senior investment grade strategist at

CreditSights. “You’re seeing the market price out a terminal

rate that had been as high as above 5% and considering where

policy goes from here.”

The Fed’s benchmark overnight interest rate is now expected

to top out at 4.90% in May. It has fallen from an expected peak

of 4.95% in May that was priced in early on Monday.

Yields also dipped in choppy trading on a report that

Russian missiles crossed into Poland, killing two people. Russia

was pounding cities across Ukraine with missiles on Tuesday, in

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attacks that Kyiv said were the heaviest wave of missile strikes

in nearly nine months of war.

Benchmark 10-year yields fell as low as 3.758%,

the lowest since Oct. 6, and were last at 3.803%. Two-year

yields fell as low as 4.321% and were last at 4.364%.

Retail sales data on Wednesday will be the next major U.S.

economic focus and investors will be watching for signs of

weakness with the Fed’s rate hikes seen denting growth and

consumer sentiment.

Atlanta Fed President Raphael Bostic said on Tuesday that he

sees little evidence of slowing inflation and noted that

borrowing costs will have to rise further for that to happen.

The Fed is widely expected to hike rates by an additional 50

basis points at its Dec. 13-14 meeting. The next CPI reading for

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November is due to be released on Dec. 13.

Closely watched parts of the Treasury yield curve remained

deeply inverted on Monday, reflecting concerns about an

impending recession.

The two-year, 10-year part of the curve was

last at minus 57 basis points. The gap between three-month and

10-year yields inverted as far as minus 49 basis

points, the most inverted since late 2019, and was last at minus

46 basis points.

Inflation expectations also dropped. Breakeven rates on

five-year Treasury Inflation-Protected Securities (TIPS) fell to

2.38%, the lowest since Oct. 13.

November 15 Tuesday 2:58PM New York / 1958 GMT

Price Current Net

Yield % Change

(bps)

Three-month bills 4.135 4.2372 0.056

Six-month bills 4.4125 4.5761 0.021

Two-year note 100-5/256 4.3635 -0.044

Three-year note 100-232/256 4.1751 -0.065

Five-year note 100-230/256 3.9234 -0.075

Seven-year note 100-184/256 3.8808 -0.062

10-year note 102-168/256 3.8031 -0.064

20-year bond 88-212/256 4.2137 -0.070

30-year bond 100-60/256 3.9865 -0.072

DOLLAR SWAP SPREADS

Last (bps) Net

Change

(bps)

U.S. 2-year dollar swap 32.25 -2.50

spread

U.S. 3-year dollar swap 13.25 -2.50

spread

U.S. 5-year dollar swap 4.00 -0.50

spread

U.S. 10-year dollar swap -1.75 -0.50

spread

U.S. 30-year dollar swap -44.25 1.25

spread

(Editing by Paul Simao and Nick Zieminski)