08.10.202611:16:01UTC+00US 10-Year Treasury Yield Up to 5.35%

The yield on the US 10-year Treasury note surged to 5.35% on Thursday, its highest level since 2002, extending its upward trend for a second straight session. The rise was largely driven by renewed gains in oil prices, which are adding to inflationary pressures and, in turn, reinforcing expectations of further Federal Reserve tightening.

Minutes from the Fed’s September meeting indicated that most policymakers still anticipate one additional increase in the federal funds rate this year, though the timing remains unclear. On Thursday, Fed Governor Waller signaled that further rate hikes will likely be required to return inflation to the 2% target, while stressing that the central bank retains “flexibility” regarding the pace of tightening.

Interest-rate futures currently imply roughly an 81% probability that the Fed will leave rates unchanged at its October meeting, while pricing in about a 71% chance of a 25-basis-point increase in December. In the meantime, today’s 30-year Treasury auction will offer an important gauge of investor appetite for longer-dated US government debt.