Treasury yields edged higher on Friday as persistent energy costs fueled inflation concerns and reinforced expectations of further Federal Reserve interest-rate hikes. The two-year yield, which is most sensitive to the Fed’s policy path, rose four basis points to 4.79%, while the 10-year yield climbed to 5.25%. The market remains volatile after strong Treasury auctions earlier in the week sparked a brief rally.
Investors have been offloading long-dated global debt for weeks, driven by fears of rising inflation due to geopolitical tensions and worries over expanding deficits. The 30-year Treasury yield hit levels not seen since 2002 earlier in the week. However, demand for 10- and 30-year Treasuries improved on Thursday, easing some pressure on yields.
Brent crude fluctuated around $104 a barrel at the end of the week, with US President Donald Trump indicating no further attacks on Iran until after the midterms and Russian President Vladimir Putin agreeing to release diesel supplies. Analysts remain cautious, noting that the market is still looking for reasons to sell rather than buy.
The upcoming US inflation report on Wednesday will be closely watched for clues on the Fed’s next move. Traders currently see a 20% chance of another rate hike in October, with a December increase fully priced in. A strong inflation reading could lift long-term rates further.