Treasury Yields Surge Near 2007 Highs Amid Rising Energy Costs

Treasury yields have reached near-historic highs as investors price in higher rates due to rising energy costs and AI-driven growth. The 10-year Treasury yield, a benchmark for mortgage rates, auto loans, and credit card debt, was flat at 5.2% on Tuesday. However, the bond market remains on track for its worst month in years.

The 30-year yield eased 1 basis point to 5.5%, while the 2-year yield, which tracks short-term Fed policy expectations, rose 1 basis point to 4.9%. The ICE BofA MOVE index, a measure of bond market volatility, has jumped almost 30% this month.

The US Treasury's role as the world's benchmark risk-free rate and its large-scale issuance have made it particularly vulnerable to the pressure on yields. The ongoing Iran war continues to weigh on energy prices, fueling expectations of further Federal Reserve rate hikes to contain inflation.

Traders are pricing in a more than 72% chance of another Fed rate hike at the October meeting, according to the CME FedWatch tool.