Bond Traders Shift Bets Toward Rate Hike After Latest Inflation Data

Traders are hedging toward another rate hike after Wednesday’s consumer price index report showed inflation accelerated in September by the fastest pace in five months.

The 3.7% inflation rate for September announced Wednesday morning was slightly ahead of analyst expectations, driven by elevated energy prices. The higher inflation print led bond traders in futures markets to reprice whether the Federal Reserve will opt to raise rates again on Oct. 28. 

The probability that the Fed will raise rates jumped from 22% on Tuesday to 47% on Wednesday morning, according to CME Group’s FedWatch tool, which uses Fed funds futures prices to create probabilities for rate movement. ..