Ajay Thomas in The Bond Buyer

Expert Quote: "Unless you have some sort of shock to the market and then a spike in weekly supply," - Ajay Thomas, Head of Public Finance, FHN Financial

Forward Look: Get ready for another potential quarter-point interest rate increase in January.

A hotter-than-expected inflation report sent U.S. Treasury yields soaring, as muni yields followed higher, though to a lesser degree.

Refinitiv MMD's scale was cut up to seven basis points at its 12:30 p.m. read, with the two-year at 2.64%-2.66%, the 10-year at 3.21%-3.22% and the 30-year at 4.69%-4.71%.

The ICE AAA yield curve was cut three to seven basis points at 12:30 p.m., while Bloomberg BVAL saw yields rose three to four basis points.

The consumer price index release renewed anxiety that the Federal Reserve will raise rates in December, said Ajay Thomas, head of public finance at FHN Financial.

And Fed Gov. Christopher Waller suggested before the release that core inflation at this level could justify a half-point hike. Even if the Federal Open Market Committee lifts rates 25 basis points next month, the market now believes another quarter-point increase could follow in January.

So the market is seeing the move in Treasuries in anticipation of that, he said.

While munis saw losses, the market is somewhat range-bound, and participants are trying to figure out the bands of that range, Thomas noted.

"Unless you have some sort of shock to the market and then a spike in weekly supply, a decision that sort of drives the market one way or the other, we're going to be a fairly ordered market for the balance of the year," he said.

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