30-Year US Treasury Yield Hits 24-Year High...New York Fed President: "No Need to Rush Hikes"

30-Year Yield Hits 5.613% Intraday
Long-Term Bonds Pressured by High Oil Prices and Fiscal Concerns
Williams: “No Need to Rush Additional Hikes”
October Hike Odds Drop from 70% to 50% After Remarks

The yield on the 30-year U.S. Treasury note surged above 5.6% during intraday trading on the 29th (local time), reaching its highest level in about 24 years. The ongoing Israel-Iran war, which has driven up oil prices, along with concerns over U.S. fiscal health, have fueled a sell-off in long-term government bonds.

Amid this backdrop, John Williams, President of the Federal Reserve Bank of New York, stated there was no need to rush further interest rate hikes. Following his remarks, the sell-off in Treasurys eased somewhat, and expectations for a rate hike at the Federal Reserve's October meeting declined in the market.

30-Year Yield Surges Past 5.61% Intraday... Rise Persists Despite Expanded Buybacks

30-Year US Treasury Bond Yield. Investing.com

The yield on the 30-year U.S. Treasury note climbed as high as 5.613% during the session, marking its highest level since June 2002. As of 4:23 p.m., it stood at 5.581%, up from the previous session. The 30-year yield continued its upward trend for the sixth consecutive trading day.

The yield on the 10-year U.S. Treasury note, considered a global benchmark, also reached its highest level in 19 years during the session. At the same time, it was trading at 5.264%, up 2.2 basis points from the previous session.

According to the Financial Times (FT), the recent sell-off in long-term Treasurys has been intensified by persistently high oil prices and strong U.S. economic data. The rise in energy prices is fueling inflation, while the U.S. economy remains robust, bolstering expectations for additional rate hikes by the Federal Reserve.

FT reported that although U.S. Treasury Secretary Scott Bessent announced an expansion of long-term Treasury buybacks in mid-August, this failed to calm the selling pressure. At that time, the 30-year yield was around 5.2%, but it has since climbed into the 5.6% range.

Concerns about the sustainability of U.S. fiscal policy are also pushing up long-term yields. The U.S. national debt exceeded 40 trillion dollars last month, and as government borrowing rises rapidly, investors are demanding higher returns to hold long-dated Treasurys.

Kristina Hooper, Chief Market Strategist at Man Group, explained that not only energy-driven inflation, but also fiscal worries, are reflected in the rise of long-term yields. She noted that the U.S. fiscal trajectory and unpredictable foreign policy could particularly reduce the appeal of U.S. Treasurys for overseas investors.

Arun Sai, Multi-Asset Strategist at Pictet Asset Management, said that the "term premium," an additional reward for holding long-dated bonds, could rise further, which is why investors are not rushing to buy long-term Treasurys.

Williams: "No Need to Rush"... Lowers October Hike Expectations

John Williams, President of the Federal Reserve Bank of New York. New York, USA – Special Correspondent Yoonju Hwang. Photo by Yoonju Hwang

As long-term yields rise, President Williams signaled the Federal Reserve could moderate the pace of further monetary tightening. In a speech delivered that day in Buffalo, New York, he said, "Given the policy measures taken at the September meeting, there is no need to rush."

Although inflation remains high and an additional rate hike by the end of the year may be appropriate, he indicated there was still time to monitor more economic data for now. The Wall Street Journal (WSJ) interpreted this as a signal that the Federal Reserve could wait until December, rather than immediately raising rates next month.

President Williams, as vice chair of the Federal Open Market Committee (FOMC), is known for representing the mainstream view within the committee, which adds weight to his remarks.

Previously, in the market, expectations for an additional hike in October had grown after the September FOMC meeting. This was due to Federal Reserve officials projecting at least one more rate increase this year and Chair Kevin Warsh maintaining a hawkish stance. However, according to CME Group, following President Williams' remarks on the afternoon of the 29th, the probability of an October 28th rate hike fell from around 70% to the 50% range.

President Williams also highlighted some easing of underlying inflationary pressures. He noted that the pace of housing cost increases is slowing and that, although the labor market remains solid, wage gains are not currently driving consumer prices up.

After his comments, the yield on the policy-sensitive 2-year Treasury note declined. The New York stock market also trimmed some of its losses, though the Dow Jones Industrial Average still closed down 0.2%.

However, the possibility of further tightening remains open. Fed Governor Michael Barr stated that additional policy adjustments would likely be needed to bring inflation back to target on a timely basis. Fed Governor Lisa Cook also expressed a similar view the previous day.

Meanwhile, before the Federal Reserve's October meeting, key economic reports will be released, including the September jobs report this Friday and the September inflation data in two weeks. These indicators are expected to serve as major grounds for determining the need and timing of additional rate hikes.

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