US 10-Year Treasury Yield Close to 2023-Highs

The yield on the US 10-year Treasury note was around 4.92% on Friday, slightly below Thursday’s levels but still close to 2023 highs, as traders weighed lower oil prices against a hotter-than-expected core CPI reading. Core CPI rose 0.3% month-on-month, up from 0.2% in July and above forecasts of 0.2%. The annual core inflation rate, however, slowed to a 2021 low of 2.4%, while headline CPI rose 0.4% as expected, leaving the annual rate at 3.4%. Following the release, the probability of a Fed rate hike next week jumped to around 90%, from roughly 70% beforehand, as the hotter-than-expected monthly core CPI reading bolstered the case for further monetary tightening. Meanwhile, the Treasury Department’s latest buyback operation resulted in weaker-than-expected purchases. The US government repurchased $5.2 billion worth of bonds, below the $6 billion cap and roughly half of the $10.5 billion offered in the operation.

The yield on the 10-year US Treasury note climbed to around 4.97% on Friday, scaling its highest levels since October 2023 after the US Treasury Department’s first expanded buyback operation resulted in weaker-than-expected purchases. The US government said it repurchased $5.2 billion worth of bonds, below the $6 billion cap and roughly half of the $10.5 billion offered in the operation. Treasury yields also moved higher after data showed US producer inflation accelerated in August as the Iran war drove up wholesale energy prices, with traders now awaiting the latest consumer inflation data. Markets are currently pricing in around a 71% probability that the Fed will deliver a 25-basis-point rate increase next week, up from 61% before the PPI report. Meanwhile, oil prices surged above $100 a barrel as the US and Iran showed no signs of backing down from the conflict, raising concerns over prolonged disruptions to global energy supplies and higher inflation.

The yield on the 10-year US Treasury note rose to 4.9% on Thursday as soaring energy prices supported the case for a Federal Reserve rate hike. New data showed that producer prices in the US rose 0.4% from the previous month in August with a surge in energy prices combining with signs of pass-through costs in broader sectors. The data coincided with a fresh rally in oil and product prices amid strikes between the US and Iran in the Middle East, prolonging the blockade of tankers in the Persian Gulf as major economies are forced to refill oil inventory. Yields were higher despite the Treasury's tripling of the notes and bonds buyback today. Besides the impact of higher energy prices, longer-term borrowing costs have been supported by record-setting corporate debt supply, with AI companies issuing north of $1.5 trillion in new issuance. On top of that, pressure on the Japanese yen drove Tokyo to repeatedly sell Treasury securities to defend the currency.