Treasury Yields March Higher on Inflation Concerns

The yield on the US 10-year Treasury note rose 10bps to 4.6% on Friday, reaching a fresh one-year high as concerns over war-driven inflation intensified. The situation in the Middle East remains fragile and far from resolved, with US President Trump describing the first sentence of Iran’s latest proposal as “unacceptable”. As a result, oil prices continued to climb amid fears of disruptions to global supply, with the Strait of Hormuz still closed. Meanwhile, a summit between President Trump and Chinese President Xi ended without any major agreements, including any indication that Beijing would help resolve the conflict. Both the CPI and PPI reports released this week suggested that the energy shock is pushing US inflation higher. Traders are now fully pricing in one rate hike by the Fed in March next year, with more than a 50% chance that interest rates will rise before the end of 2026.

US 10 Year Government Bond Yield increased to 4.54%, the highest since May 2025. Over the past 4 weeks, US 10 Year Note Bond Yield gained 22.30 basis points, and in the last 12 months, it increased 5.90 basis points.

The yield on the US 10-year Treasury note climbed above 4.5% on Friday, reaching its highest level in a year as mounting inflationary pressures tied to the Iran war strengthened expectations for a Federal Reserve interest rate hike later this year. Data released earlier in the week showed US wholesale inflation accelerated at its fastest pace since 2022 in April, while consumer prices recorded their largest increase since 2023 amid renewed cost pressures linked to the energy shock caused by the conflict. Retail sales growth also slowed in line with expectations but continued to reflect resilient consumer spending. Markets have now fully priced out any possibility of a Fed rate cut this year, while some traders are increasingly betting on a potential rate hike by December. Meanwhile, investors continued to monitor the second day of high-level talks between President Donald Trump and Chinese President Xi Jinping.