US Treasury Yield Nears 5% as Oil Prices Soar

The US Treasury yield has reached a three-year high of nearly 5% for the first time since October 2023. The 10-year US Treasury note saw its yield rise by around 1.75%, reaching 4.930% on Thursday, after recording a session low of 4.827%. This comes amid escalating global oil prices, which have surged more than 5.0% and reached their highest levels in four months.

The sharp increase in oil prices is attributed to the ongoing military tensions between the United States and Iran, as well as attacks on oil tankers in the Strait of Hormuz and Saudi oil facilities by the Houthis. The rising oil prices are expected to put upward pressure on inflation, which could lead to a US interest rate hike in September.

According to CME's FedWatch Tool, the probability of the Federal Reserve leaving interest rates unchanged at its September meeting has fallen from 40% to 30%, while the probability of a 25-basis-point rate hike increased from 60% to 70%. Investors are awaiting US consumer price data on Friday to reassess their expectations.