Yield Hikes Continue Amid Global Bond Selloff and Elevated Inflation Concerns

The US Treasury yield remained near its highest level since June 2007 at 5.17% on Friday, as a global bond selloff continued into its second week.

The 30-year Treasury yield was flat at 5.463%, after surging to levels not seen since 2004. The 2-year note yield held steady at 4.899%. This move follows Thursday's sharp climb, when the 10-year yield jumped more than 10 basis points to as high as 5.223%, and the 30-year touched 5.501%, its highest since June 2004.

Global government bonds sold off in tandem this week, with Japanese government bonds, UK gilts, German bunds, and other eurozone debt all hitting fresh highs. However, eurozone and Japanese yields edged lower on Friday.

Federal Reserve Governor Michael Barr stated that additional rate increases will likely be needed to bring inflation back to the Fed's 2% target. Speaking at a housing affordability conference hosted by the Federal Reserve Bank of Chicago, he said 'In my base case, further policy adjustments are likely to be needed to ensure inflation comes down to target in a timely fashion.'

Barr noted that inflation is above the 2% target and not clearly trending toward target in a timely way. He described last week's quarter-point rate hike as a move 'in the right direction.' The Fed raised its benchmark rate to a range of 3.75% to 4%, its first hike in three years, with sixteen of eighteen policymakers signalling that at least one more increase is likely before year-end.

The bond market has been pressured by stubbornly high oil prices and a stronger-than-expected economic reading from S&P Global's flash PMI data. US private-sector activity expanded at its fastest pace in over five years in September, adding to concerns that inflation will stay elevated for longer.