FX.co ★ US 10-Year Yield Approaches 3-Year High

The yield on the US 10-year Treasury note rose above 4.8% on Wednesday, approaching its highest level since October 2023, as a renewed surge in oil prices stoked inflation worries and bolstered expectations of an imminent Federal Reserve interest rate hike. Oil prices advanced for a third straight session amid escalating tensions between the US and Iran, heightening fears of further disruptions to energy supplies from the Middle East.

At the same time, Fed Chair Kevin Warsh’s firm stance on tackling inflation strengthened market bets on a rate increase, with futures now implying roughly a 70% probability of a hike this month. Fed Governor Michael Barr also said on Tuesday that the central bank must be ready to raise interest rates if inflation fails to moderate.

Investors are now focused on the ADP employment report due Wednesday and the nonfarm payrolls data on Friday for additional signals on the Fed’s policy trajectory.