US 10-Year Treasury Yield Surpasses 4.75%, Highest in 19 Months

Oil Price Surge Rekindles Inflation Concerns
Hawkish Comments from Warsh Raise Odds of Additional Fed Rate Hikes
5-Year Yield Also Hits Highest Level Since Early Last Year

Amid renewed military tensions between the United States and Iran and a resulting surge in international oil prices, the yield on the 10-year US Treasury bond surpassed 4.75%. Concerns are rising that higher oil prices could once again increase inflationary pressures in the US. As a result, expectations for additional rate hikes by the US Federal Reserve (Fed) are growing, triggering a sell-off in US Treasuries.

US 10-Year Treasury Yield. Investing.com

According to Bloomberg on August 31 (local time), the yield on the 10-year US Treasury bond broke through 4.75% during trading. This is the first time the 10-year yield has exceeded 4.75% since January 2025.

Selling pressure is not limited to the 10-year notes, as it has expanded across bonds with other maturities as well. The yield on the 5-year note also climbed above 4.50%, reaching its highest level since early last year. The yield on the 30-year Treasury bond rose by about 5 basis points (1bp = 0.01 percentage point) to around 5.26% on the day.

However, the 30-year yield remains below the peak it reached in mid-August. Long-term yields stabilized somewhat after the US Treasury announced it would expand Treasury buybacks (early redemption) to increase liquidity in the long-term bond market.

The direct trigger behind the rise in Treasury yields was the sharp increase in international oil prices. As US President Donald Trump warned of the possibility of additional strikes on Iran, major international oil prices—including West Texas Intermediate (WTI) and Brent crude—jumped by more than 3%.

Renewed military conflict between the United States and Iran has intensified concerns that rising energy prices could stoke inflation in the US. In turn, this has strengthened the outlook that the Fed may further raise its policy rate.

According to Bloomberg, the sell-off in US government bonds has already been apparent since last week. Yields, especially on short-term Treasuries, spiked after Fed Chair Kevin Warsh voiced strong wariness about inflation at the Jackson Hole Economic Policy Symposium on August 28.

Chair Warsh noted at the time that, while this summer's price data was better than expected, it is hard to see any meaningful improvement in the underlying inflation trend. He also left open the possibility of further tightening if inflation does not slow sufficiently toward the Fed's 2% target.

As a result, market expectations for a rate hike at the Fed's September meeting have increased to around 60%. Barclays revised its forecast after Warsh's remarks, projecting that the Fed will raise its benchmark rate by 0.25 percentage point each in September and December.

Meanwhile, the US employment report for August—set to be released this week—will be a key variable determining the direction of Treasury yields. If the jobs market proves stronger than expected, expectations for a rate hike by the Fed in September are likely to intensify further, increasing the likelihood that the 10-year yield will rise again.

This content was produced with the assistance of AI translation services.