Treasury Yields Soar to Two-Decade High Amid Interest Rate Uncertainty

The US Treasury market has just experienced its worst quarter since 1994. The benchmark 10-year Treasury yield, US10Y, rose by 87.1 basis points over the September quarter, according to LSEG data.

This is the sharpest quarterly rise in US10Y yields since 1994, with the current rate reaching a two-decade high of 5.34% early on Thursday. The 30-year Treasury yield, US30Y, also reached a 24-year high at 5.67%, up 3 basis points.

Despite recent inflation data and still-resilient growth indicating that the Federal Reserve may wait until December to raise interest rates again, markets are pricing in at least three hikes by mid-2027.

Analyst James Picerno noted that 'for now, the bond market appears unconvinced that slower growth, lower inflation, or fiscal restraint are close at hand.' He added that 'until one of those narratives gains traction, Treasury yields may continue marching higher, testing not only the economy's resilience but also investors' willingness to keep pricing in a best-case scenario centered on improving economic activity.'