The yield on the US 10-year Treasury note, seen as a proxy for global borrowing costs, approached 3.8%, a level not seen in more than a month, as investors adjust their portfolios for a higher terminal rate. The closely watched US CPI reading for January landed at 6.4%, the lowest since October 2021, still above economists’ forecast of 6.2%, opening the door to further rate hikes by the Federal Reserve.
At the same time, Dallas Fed President Lorie Logan was the last official to warn that borrowing costs may need to go higher than expected. Money markets have now priced at least two more 25 basis point rate hikes this year and see interest rates peaking at 5.2% by July. Looking ahead, Wall Street and the Fed are again in a standoff on the future path of interest rates, with the former betting on a rate cut later this year while the latter reaffirmed its view that interest rates will stay higher for longer.
