US 10-Year Yield Declines

The yield on the US 10-year Treasury note climbed to around 4.78% on Tuesday, reaching its highest level since January 2025 as rising oil prices and hawkish signals from the Federal Reserve strengthened expectations for a rate hike this month. Investors also braced for a busy economic calendar, with the latest US manufacturing and services activity data due later today, ahead of the highly anticipated August jobs report on Friday. Warsh said on Friday that the Fed will “have work to do” if policymakers lack the confidence they need that inflation is moving toward 2%. Markets are now pricing in a more than 65% chance of a September hike, up from around 36% before his remarks. Meanwhile, oil prices advanced for a second straight day after US forces struck an island in the Strait of Hormuz, while Iran responded with attacks on the UAE and Jordan. Higher energy costs are fueling inflation concerns and strengthening expectations for tighter Fed policy.

The yield on the US 10-year Treasury note rose for a fourth consecutive session to 4.76% on Monday, reaching its highest level since January 2025, as oil prices climbed after the US and Iran exchanged strikes for the first time in about a month, heightening inflation concerns and prompting traders to increase their bets on a Fed rate hike in September. Comments from Fed Chair Warsh at the Jackson Hole Symposium on Friday reinforced those expectations, with Warsh saying the Fed would “have work to do” if policymakers did not gain confidence that inflation was moving toward its 2% target. Warsh has consistently emphasized the need to bring inflation down, although the Fed kept interest rates unchanged at both its June and July meetings, leaving some uncertainty over the timing of a potential move. Markets are currently pricing roughly a 64% probability of a 25 bps rate hike in September.

The yield on the 10-year US Treasury note traded around 4.7% on Monday after rising for three consecutive sessions, as hawkish remarks from Federal Reserve Chair Kevin Warsh prompted traders to increase bets on an imminent interest rate hike. In his Jackson Hole address on Friday, Warsh warned that inflation isn’t meaningfully slowing and reaffirmed policymakers’ commitment to returning inflation to their 2% target. Markets are now pricing in around a 57% chance that the Fed will raise rates by 25 basis points in September, up sharply from about 40% a week ago. A surprise upward revision to the University of Michigan’s consumer sentiment index also supported US Treasury yields. Investors now turn their attention to Friday’s August jobs report for greater clarity on the outlook for US monetary policy.