Yield on 10-year US government bonds reached 5.04% — MyJoyOnline
In the United States, the yield on 10-year government bonds, according to MyJoyOnline, rose to 5.04%, the highest level since 2007. The indicator later declined somewhat. The rise in the cost of government borrowing is linked to growing inflation concerns following an increase in oil prices.
Oil and inflation expectations
According to the publication, government bond yields worldwide have been rising for several months. MyJoyOnline links this to concerns that the jump in oil prices since the start of the US and Israel’s war with Iran could fuel inflation and lead to higher interest rates.
On Tuesday, the benchmark wholesale oil price exceeded $109 per barrel, compared with about $86 at the end of August. Prices received a new boost from concerns over Saudi Arabia’s ability to export oil amid rising tensions in the region.
Treasury actions and market expectations
The United States is buying back bonds in an attempt to lower Treasury yields. Treasury Secretary Scott Bessent described the intervention as successful.
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Investors expect Federal Reserve Chair Kevin Warsh to raise rates to curb inflation linked to more expensive oil. President Donald Trump opposes rate hikes, believing that lower rates are beneficial for economic growth.
Higher interest rates and inflation generally increase the yield investors demand for government borrowing. Bond yields can also reflect investor confidence in the government: higher figures may indicate a lower level of confidence.
Yields are also affected by competition for debt financing from technology companies raising significant funds to build data centers for artificial intelligence. BMO Wealth Management chief market strategist Carol Schleif said bond markets had been signaling for several weeks a possible need for higher rates. In her view, rates may remain high if geopolitical tensions and high energy prices persist.
