US Treasury yields rise as Fed's Waller presses rate hike case

Short-dated Treasury yields jumped in London trade on Tuesday after Federal Reserve Governor Christopher Waller said the US central bank ought to raise short-term borrowing costs next month even if government data shows inflation has cooled.

The Fed should also consider an upsized half-point rate hike if the inflation picture worsens, Waller said.

October US inflation numbers are due out later on Tuesday.


Economists polled by Reuters forecast the core measure - which excludes volatile food and energy prices - likely increased by a moderate 0.2% last month from September, compared with a 0.3% rise a month before.

If core consumer prices rise 0.3% or more from September, "a stronger policy move may be needed," Waller said. "In that case, I believe a 50 basis point hike in the policy rate should be considered at the December meeting."

Two-year Treasury yields were up 6 basis points at 4.61% in London, while 10-year borrowing costs were around 2 bps higher at around 4.88%.

The rise in Treasury yields was in contrast to Europe, where government bond yields were broadly lower on the day as oil prices fell further.

Money markets now fully price in a 25 bps US rate hike in December, versus roughly 80% last week.