US 10-Year Yield Steadies Ahead of Fed Minutes

The yield on the 10-year US Treasury note steadied around 5.31% on Wednesday, remaining near 24-year highs as investors awaited minutes from the Federal Reserve’s latest meeting for clues on the outlook for monetary policy. Traders also monitored remarks from Fed officials, with policymakers increasingly signaling a less hawkish stance on interest rates following softer-than-expected PCE inflation and jobs data released last week. Markets are currently pricing in nearly an 80% chance that the Fed will keep policy unchanged this month. Meanwhile, Treasury bonds remained under pressure as concerns over persistent inflation, widening fiscal risks and increased issuance of AI-related debt continued to weigh on sentiment. Oil prices also advanced as renewed attacks on tankers in the Strait of Hormuz and continued fighting between Saudi forces and the Houthis heightened concerns over energy supplies, keeping inflation and potential rate hikes in focus.

The yield on the 10-year US Treasury note was at 5.26% on Tuesday, pausing a surge that peaked at a 24-year high of 5.33% touched yesterday, tracking the momentary dip in wholesale fuel prices. Oil bids were tamed by signs that some laden tankers passed through the Strait of Hormuz. The 10-year yield has surged over 110bps this year as risks of higher rates from the Federal Reserve, soaring federal deficit spending, and increasing corporate debt supply triggered a plunge in demand for duration. The price gauge in the ISM Services PMI surged to a four-year high, consolidating expectations that the Fed will deliver another rate hike this year. Meanwhile, a widening budget deficit raised the outlook for the supply of Treasury securities despite the Treasury's preference to service its increasing debt with coupon-less bills. The latest figures from the CBO showed net public debt rising from 101% of GDP this year to over 175% by 2056, assuming a 10-year yield below 4.5%.

The US 10-year Treasury yield hovered around 5.32% on Tuesday, remaining near its highest level since 2002 as the global bond selloff persisted amid growing fiscal concerns and stubborn inflation pressures. Selling was also widespread across global bond markets, with French yields climbing to more than two-decade highs as heavy debt burdens and political deadlock weighed on sentiment. Spanish yields also moved higher on Monday after Prime Minister Pedro Sanchez announced a snap election for November 29. In the US, ISM data showed that input cost pressures across the services sector accelerated at their fastest pace in more than four years last month. Meanwhile, markets are assigning roughly a 78% chance that the Federal Reserve will leave rates unchanged this month following weaker-than-expected employment data. Investors are now turning their attention to Wednesday’s meeting minutes for additional signals on the Fed’s future policy direction.