FX.co ★ Treasury Yields Back on the Rise

The yield on the US 10-year Treasury note climbed again on Friday, surpassing 5.2% and marking its highest level since mid-2007. This move extended a sharp three-session sell-off that had already driven the benchmark yield up by 23 basis points.

Market participants shifted their attention back to hawkish remarks from Federal Reserve officials, while the absence of tangible progress in US-Iran negotiations to halt the conflict continued to stoke inflation fears. At the same time, the University of Michigan’s consumer sentiment survey confirmed a pronounced increase in inflation expectations for September.

Robust US economic data, deteriorating fiscal conditions, and mounting government debt have further pressured the Treasury market. Efforts by Treasury Secretary Bessent to curb long-dated yields via expanded Treasury buybacks are widely viewed as having had only a limited effect.

Futures pricing indicates that investors currently expect the Federal Reserve to raise the federal funds rate by 25 basis points next month, with the implied probability of such a move at roughly 66%.