U.S. equity markets opened for a full session on Veterans Day, even as fixed-income desks largely remained dark for the holiday. The split schedule follows a sharp repricing in the Treasury market, where short-dated yields led a selloff that compressed the yield curve to its tightest level in months.
According to official Treasury data, the gap between two-year and ten-year yields narrowed to 25 basis points on Tuesday, down from 32 basis points on Monday. The move was driven by a 17-basis-point jump in the two-year yield to 4.73%, while the ten-year yield rose a more modest 10 basis points to 4.98%. The 30-year bond yield advanced 9 basis points to 5.35%, underscoring the relative underperformance of shorter maturities.
The repricing followed the release of October consumer price index data, which showed headline inflation rising 0.4% month-over-month, matching expectations. Core prices, which strip out food and energy, climbed 0.3% for the third consecutive month, suggesting persistent price pressures. Notably, the Bureau of Labor Statistics was unable to provide year-over-year comparisons for October because price collection was suspended during the 2025 government funding lapse, leaving investors to rely on sequential readings.
Market participants interpreted the data as reinforcing the likelihood of another Federal Reserve rate increase. BlackRock's Rick Rieder, commenting in Bloomberg's Tuesday market report, said a December hike appears 'quite likely,' with the debate centering on the magnitude of the move. The market now prices in a high probability of a 25-basis-point hike, though some economists argue for a larger step given the resilience of core inflation.
The holiday schedule creates a notable divergence between the two markets. The New York Stock Exchange is open for its standard 390-minute core session, from 9:30 a.m. to 4:00 p.m. Eastern. In contrast, the Securities Industry and Financial Markets Association recommends a full closure for dollar-denominated fixed-income trading, covering government, corporate, and municipal bonds in the U.S., U.K., and Japan. Individual firms retain discretion over whether their bond desks operate.
This separation means that any stock price movements on Wednesday cannot be directly compared with fresh bond quotes, as the Treasury readings are dated November 10. Investors will need to wait until Thursday for the next full cross-market session, when the yield curve's trajectory will be tested again.
The yield curve has been a focal point for economists, as an inverted curve historically signals recession risk. However, the current narrowing is occurring from an inverted position, with short yields still above long yields. The 25-basis-point spread remains well below the 32-basis-point level seen just a day earlier, reflecting a swift adjustment in rate expectations.
For equity investors, the bond market's signal is ambiguous. While higher short-term yields typically pressure growth stocks by raising discount rates, the market's resilience suggests that earnings momentum and corporate fundamentals are providing offsetting support. The S&P 500 and Nasdaq have shown modest gains in early trading, though volumes may be thinner due to the bond holiday.
Looking ahead, the November 12 session will be the first opportunity for a synchronized reaction to the CPI data. If the yield gap holds near 25 basis points, it would indicate that the market is pricing in a more aggressive Fed path, which could weigh on equities. Conversely, a stabilization in yields might alleviate some of the recent pressure on high-multiple technology stocks.
In summary, the combination of a hot inflation report and a holiday-shortened trading week has created a complex environment for investors. The Treasury market's repricing is a clear signal that rate expectations are shifting, and the equity market's response—both today and in the coming sessions—will be crucial for gauging the broader market's direction.
