Treasury Market Selloff Sends 10-Year Yield To 19-Month High

The US 10-year yield topped 4.75% on Monday for the first time since January 2025 as rising oil prices bolstered expectations that the Federal Reserve will hike interest rates.

The selloff extended to other tenors, with five-year yields also hitting their highest level since early last year and 30-year yields exceeding last week’s highs. Key oil benchmarks rose more than 2%, after reaching session highs during US morning hours after President Donald Trump threatened Iran with additional attacks.

Monday’s moves extend a selloff that has gripped Treasuries in recent days, as investors grapple with percolating worries over government debt while gauging how aggressively the Fed will need to raise rates in order to fight inflation. Short-dated yields soared on Friday after Fed Chairman Kevin Warsh, speaking at the central bank’s Jackson Hole Symposium, signaled an increased likelihood of rate hikes aimed at curbing price pressures.

“The Fed is ready to act when needed,” said Sean Simko, head of fixed-income investment management at SEI Investments Corp. While the August employment report to be released Friday and consumer prices data on Sept. 11 will be influential, “if the labor market remains steady and inflation stays elevated, that’s probably going to have the Fed lean into raising interest rates” on Sept. 16, its next decision date.

After Warsh’s speech, economists at Barclays and Societe Generale changed their forecasts, predicting rate hikes this year that they previously had not anticipated.

While 30-year yields also climbed Monday, rising five basis points to near 5.26%, they remained well below their mid-August multiyear highs, having retreated after the Treasury Department said earlier this month it would increase buybacks of debt in the sector to bolster its market value.

The longest-maturity Treasuries may also benefit from anticipation of buying tied to the month-end rebalancing of bond indexes at 4 p.m. New York time, in which the larger-than-average amount of 10- to 30-year debt sold during the month will be added to benchmarks.

In the meantime, however, options traders sought protection against losses in longer-maturity Treasuries. Notable trades on Monday included the purchase for around $6.5 million of December put options on the US Treasury Bond futures contract with a strike price that anticipates 30-year yields rising to around 5.7% from around 5.25% currently. The options expire Nov. 20.

The rise in longer-maturity yields also reflects “forthcoming supply” — particularly in the corporate bond market, where September historically has been a banner month and is expected to exceed previous totals for the month — and “an inflation outlook that’s hardly improving,” said Mark Spindel, chief investment officer at Potomac River Capital.

And despite Warsh’s Jackson Hole comments, “there’s been debate as to whether he intends to tighten in September” that’s allowing inflation anxiety to fester, Spindel said.

This article was provided by Bloomberg News.