May 2026 core CPI rose 0.2% monthly, below the expected 0.3%, lifting Treasury prices. But headline inflation hit 4.2% as rate-hike odds climb past 50%.

Bond traders price in Fed rate hikes as April CPI hits 3.8% and the 2-year Treasury yield reaches 4.18%, the highest since February 2025.

Headline inflation rose an expected 0.5% in May, but the beat on the core rate — which cuts out food and energy costs — is pleasing markets.