Treasury ETFs plunge after hot CPI print sends yields soaring

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Thursday’s hotter-than-expected CPI report has sent Treasury-based exchange traded funds sharply lower, as the yields on benchmark U.S. government debt instruments rose to their highest levels in more than a decade.

The iShares Core U.S. Aggregate Bond ETF (NYSEARCA:AGG) and the Vanguard Total Bond Market Index Fund (NASDAQ:BND) each traded lower by 1%. These funds have more than $150B in combined assets under management.

Looking at trading in the bond market, the U.S. 2-year Treasury yield (US2Y) has topped 4.50% a level not seen since August of 2007, while the U.S. 10-year Treasury yield (US10Y) moved above 4.00%, touching a high not experienced since October of 2008.

This action in fixed income followed September’s CPI print, which showed headline consumer prices rising 8.2% from last year. The core figure, which excludes food and energy, rose 6.6% on a year-over-year basis, a new 40-year high.

Other Treasury ETFs also in the red include: (NASDAQ:TLT), (NASDAQ:IEI), (IEF), (SHY), (GOVT), (VGSH), (VGIT), (SCHO), (SCHR), (SPTL), (TLH), and (VGLT).

Moreover, the yields between the 10Y and 2Y continue to remain deeply inverted, as they push to a 48-basis point inversion spread.

Outside of the bond market, broader equity indices also sell-off as Wall Street prices in larger future Fed hikes.