Treasury Yields Climb, 10-Year at Highest Since 2025

The yield on the US 10-year Treasury note rose about 10bps to 4.37% on Friday, reaching its highest level since July 2025, as investors continued to assess the impact of the war with Iran on inflation and brace for a more hawkish tone from the Federal Reserve. Oil prices have swung between gains and losses, but remain near 2022 highs, highlighting persistent volatility in energy markets as strikes across the Middle East continue. The Federal Reserve kept the federal funds rate unchanged on Wednesday. Updated projections still point to one rate cut this year, but policymakers highlighted uncertainty about the economic impact of the war and flagged elevated upside risks to inflation. Meanwhile, the yield on the 2-year Treasury note which is more sensitive to expectations for short-term Federal Reserve policy, rose nearly 10bps to 3.9%.

The yield on the 10-year US Treasury note rose to around 4.28% on Thursday, nearing its highest level since August amid an increasingly hawkish Federal Reserve outlook. The central bank left the fed funds rate unchanged, as expected, noting the uncertain economic impact of the Iran war while highlighting elevated inflation risks. The Fed indicated it will not cut rates until inflation shows signs of easing again, though it still projects one rate reduction this year and another in 2027, consistent with its December outlook. Data on Wednesday also showed US producer prices rose more than expected in February. Investors now await the latest weekly jobless claims for fresh signals on labor market conditions. Meanwhile, oil prices climbed further following attacks on energy infrastructure in the Middle East as the Iran conflict continues. President Donald Trump temporarily waived the Jones Act to reduce the cost of transporting oil, gas, and other commodities within the US.

The yield on the 10-year US Treasury note remained above the 4.2% mark on Wednesday, trimming its two-session pullback and holding most of its surge since the start of March amid signs that the FOMC is heeding to inflationary risks to the US economy. The Federal Reserve held its rates unchanged, as expected, but policymakers raised their projections of both core and headline inflation, in addition to an improved outlook in GDP growth. Pro-inflationary risks were magnified by a hot PPI reading for February and more increases in energy prices following attacks on Iranian energy infrastructure. Likewise, a greater share of FOMC members signaled that no rate cuts are required this year in their baseline scenario, although concerns of a softening labor market drove other members to opt for an outlook of more accommodative policy. Rate traders remained split between one and two rate cuts this year.