Hot inflation, lower yields.

The 10-year Treasury yield ended Friday, Oct. 16 at 5.09% in the Treasury's 3:30 p.m. ET par curve, a basis point under Thursday and 15 basis points under the 5.24% of a week earlier. The two-year finished at 4.74%, down three on the day and six on the week; the 30-year held at 5.43%, 17 basis points below the prior Friday's 5.60%. It came in a week that should, on the data alone, have gone the other way.

The data were hot. September's consumer price index, out Wednesday, Oct. 14, rose 0.6% on the month and 3.7% over the year, up from 3.4% in August. Gasoline rose 9.1% in the month and accounted for over half the monthly increase; the energy index is up 20.4% over 12 months. Core prices rose 0.3%, the same as August, and 2.6% over the year. Thursday's producer price index was hotter still: final demand up 1.3% in September and 6.3% over the year, with energy goods up 10.8% in the month and the measure that strips out food, energy and trade services up 0.5%.

Yields fell despite both. The likelier reading, by this issue's arithmetic, is that the market separated the number from the cause. The pump drove the headline while the core sat still: core held at 0.3% for a second month. At the same time the stock market sold its biggest names: the S&P 500 lost 1.1% on Friday and the Nasdaq 2.1%, its worst week since June, as AP's market report put it, with chipmakers leading. This issue's reading is that money leaving technology shares went looking for a safer place to sit, and a 10-year above 5% was it.

The Fed is the other half of the story. The committee raised its target range a quarter point in September, to 3.75% to 4.00%, which AP notes was its first increase in three years; the effective rate printed 3.88% on Thursday. Traders expect no change at the Oct. 27–28 meeting. What moved this week was December: AP, citing CME Group data, puts the odds of a December increase at 74.3%, up from 50.2% a month earlier. Chair Kevin Warsh, in Bangkok for a meeting of financial leaders, gave no new signal, and as of Saturday he cannot: the committee's blackout began at midnight on Oct. 17 and runs to the end of Oct. 29.

Oil is why the pump matters. Brent for December settled at $109.86 a barrel on Friday, up $3.94 or 3.7%, and briefly touched $110 for the first time since May; November WTI settled at $101.41, up $3.44. The Saudi-led coalition said it had intercepted a ballistic missile aimed at Yanbu, the Red Sea port through which the kingdom exports crude without passing the Strait of Hormuz, which Reuters reports Iran has largely throttled since February. The national average for gasoline stood at $4.33 a gallon, per AAA, against $3.06 a year ago.

For today, the question is whether Friday's split holds. If oil stays above $100 through the month, headline inflation keeps running ahead of core and the December pricing has room to rise further; if the stock sell-off deepens, the bid for Treasuries can outlast the inflation prints for a while, as it did last week. Either way the Fed is silent for the next 11 days, so the data and the auctions do the talking: housing starts on Tuesday, a 20-year bond on Wednesday, and 13- and 26-week bills this morning.