US 10-Year Treasury Yield Down After Sharp Rise

The yield on the US 10-year Treasury note edged down to 5.21% on Tuesday, pausing the previous session’s sharp rise, which saw the benchmark yield climb 8bps to its highest level since mid-2007, with traders continuing to price in the prospect of further tightening by the Fed. Little progress has been made in US-Iran talks aimed at ending the conflict and fully reopening the Strait of Hormuz. The situation continues to put upward pressure on oil prices, raising concerns that inflation could accelerate. Meanwhile, strong economic activity in the US, along with concerns over large fiscal deficits and rising government debt, is also weighing on the bond market. A series of key economic data releases this week will provide further insight into the health of the US economy. Swaps traders are pricing in nearly a full percentage point of Fed rate hikes over the coming year. The benchmark 10-year yield is up nearly 46 basis points in September.

The yield on the US 10-year Treasury note strengthened above 5.2% on Tuesday, approaching its highest levels since 2002 as markets anticipated further Federal Reserve tightening to combat energy-driven inflation linked to persistent US-Iran uncertainty. Markets are currently pricing in roughly a 70% probability of a Fed rate increase in October. Oil prices extended their gains after Iranian officials reportedly cast doubt on the prospects of reaching an agreement before the US midterm elections in November, following President Trump’s rejection of Tehran’s latest proposal. Meanwhile, investors are preparing for a busy week of key economic releases, including the PCE inflation report and monthly jobs data, which are expected to offer further insight into the health of the US economy and shape Fed expectations. Strong economic data, worsening fiscal conditions, and rising US government debt have also put pressure on the Treasury market in recent weeks.

US 10 Year Government Bond Yield increased to 5.25%, the highest since June 2007. Over the past 4 weeks, US 10 Year Note Bond Yield gained 48.20 basis points, and in the last 12 months, it increased 109.40 basis points.