U.S. 30-Year Treasury Yield Hits 5.35%, Highest in 19 Years, Amid Oil Surge and Inflation Concerns

[Financial News] U.S. Treasury yields surged as a sharp rise in international oil prices and worsening inflation indicators increased the likelihood of an additional rate hike by the Federal Reserve System (Fed).
In the New York bond market on the 10th (local time), the 30-year U.S. Treasury yield soared to 5.354% during the session, reaching its highest level in approximately 19 years, since June 2007. The 10-year yield, a global benchmark for long-term interest rates, also climbed to 4.927% during the session, its highest level since October 2023. The two-year yield, which is sensitive to monetary policy, rose to 4.518%.
Market experts view a break above the 5% threshold for the 10-year yield as a realistic scenario. Tom di Galoma, a managing director at Mischler Financial, forecast, "Once the 10-year yield exceeds 4.95%, it will head straight to 5%."
A surge in international oil prices and an increase in the producer price index (PPI) fueled market anxiety. The August PPI released by the U.S. Department of Labor rose 0.4% from the previous month and 5.4% from the same month a year earlier, exceeding both the previous month's 0.1% increase and the market forecast of 5.3%. Energy prices also jumped 4.2% month over month, driving the rise in inflation.
Amid heightened geopolitical risks in the Middle East, Brent crude oil surged to around $105 a barrel, while West Texas Intermediate crude oil (WTI) also broke above $100. Concerns over a possible disruption to global oil shipping routes reached a peak after reports that the Houthi rebels in Yemen had taken control of areas near the Bab-el-Mandeb Strait, a strategic chokepoint at the entrance to the Red Sea.
As inflationary pressure intensified again, the federal funds futures market raised the probability of a 0.25-percentage-point rate hike by the Fed in September, to a range of 3.75% to 4.00%, from 62% to around 70%, according to the CME FedWatch Tool.
Fiscal uncertainty stemming from the political sphere has also emerged as a major factor pressuring the Treasury market. Donald Trump's pledge to pay every adult $5,000 per person, or approximately 6.7 million won, if he wins the November midterm elections raised concerns that the U.S. national debt, which has already surpassed $40 trillion, and the fiscal deficit would worsen further. Those concerns pushed long-term yields even higher.


[email protected] Yoon Jae-jun Reporter