US Yields Soar as Inflation Concerns Mount Amid Oil Price Surge
US Treasury yields rose sharply on Thursday after the latest inflation reading pushed up expectations for a Federal Reserve interest rate hike next week. The producer price index (PPI) increased 5.4% in the 12 months through August, surpassing consensus expectations of 5.3%. Energy prices surged 4.2% in August, their first increase in two months.
Oil futures extended their rally, with both benchmarks trading over $100 a barrel. The rise in oil prices exacerbated inflation worries and boosted the likelihood of a Federal Reserve interest rate hike next week. Investors now perceive this print as inflationary rather than disinflationary, leading to higher yields and lower equities.
The yield on benchmark US 10-year notes rose 10.93 basis points to 4.946%, its highest level since October 2023. The 30-year bond yield increased 7.27 basis points to 5.3587%, reaching its highest point since June 2007. The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 13.33 basis points to 4.56%, touching its highest point since July 2024.