US 10-Year Treasury Yield Highest Since January 2025

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.

The 10-year US Treasury yield climbed to 4.73% after Fed Chair Kevin Warsh warned that inflation has not meaningfully slowed, signaling that policymakers may have “work to do” to bring price pressures back to the Fed’s 2% target. In his first major speech since taking the chair in May, Warsh reiterated that 2% inflation is a firm and fixed objective and said financial conditions are not currently restrictive. He also emphasized that interest rates remain the Fed’s “predominant tool” for achieving its mandate. He added that recent PCE and CPI data, while better than expected, do not indicate a meaningful improvement in underlying inflation trends. His closely watched remarks offered more clarity on his economic and policy views after criticism that his more limited communication strategy had left investors with little guidance on the near-term outlook. Money markets subsequently priced in a near 50% chance of a September rate hike, according to CME FedWatch.