American producer prices are rising at their fastest annual pace since November 2022

Producer prices rose 0.3% in October, below the 0.4% economists expected. The annual rate came in at 6.5%, the highest in nearly four years.

So why did bond yields rise on a soft number? The annual rate is the one the Federal Reserve has to answer for. Prices excluding food, energy and trade services rose 0.5% in October, the same as September, and food alone rose 1.3% on the month.

The week's move in the bond market was much larger than Friday's. The two-year Treasury yield added 35.2 basis points over the five sessions to 4.872%, its biggest weekly move since September 2024.

Chart: US producer inflation climbs back to 6.5%. US producer prices for final demand, change from a year earlier, monthly, November 2021 to October 2026. October's rate was the highest since November 2022. — This story’s chart of the day.

The 10-year finished at 5.152%, up 29.4 basis points and ending five straight weeks of falls. Futures now treat a December rise as a near certainty, with about 88% on a quarter point and 12% on a half.

Where it bites

producer prices are what companies pay before they decide what to charge, so October's 6.5% is a fair guess at the pressure still to reach shoppers. The core measure has run at 0.5% for two months now, and that is the line to follow into December.

This story ran in The Chip Trade Unwinds Saturday 14 November’s edition, with the market snapshot, the other two stories, the numbers and the week ahead. Read the whole edition →

General information and commentary only, not financial advice. It does not take account of your objectives, financial situation or needs, and reflects the author's own reading of public information at the time of writing, which may be wrong. Sharespective, its people and its clients may hold positions in the companies covered. Do your own research and talk to a licensed adviser.