U.S. Long-Term Yields Hit 24-Year High... Oil, Fiscal Worries Fuel Sell-Off

U.S. 30-Year Treasury Yield Hits 5.73% Intraday
Mortgage Rate at 7.49%... Rises for Seventh Straight Week

Global government bond selling intensified again amid rising international oil prices driven by tensions in the Middle East and concerns over the fiscal soundness of major economies. U.S. 10-year and 30-year Treasury yields rose to their highest levels since 2002. U.S. mortgage rates also reached a nearly three-year high, adding to the burden on households seeking to buy homes.

According to the Financial Times (FT), Bloomberg and other outlets on Oct. 7, local time, the yield on 30-year U.S. Treasuries rose by as much as 9 basis points (1 basis point = 0.01 percentage point) during the session, reaching 5.73% annually. This was its highest level since May 2002.

The yield on 10-year U.S. Treasuries, a global benchmark for bond yields, also rose by more than 8 basis points to 5.356% annually, its highest level since April 2002. Bond prices and yields move in opposite directions.

Rising international oil prices appear to be adding to upward pressure on Treasury yields. Tensions in the Middle East have persisted following attacks on Saudi Arabia by Yemen's Houthi rebels. As of this writing, Brent crude for December delivery was trading at $102.23 a barrel, up 1.6% from the previous session.

Some analysts say bond selling is being fueled by uncertainty over when the war in Iran will end, the heavy public debt burdens of major economies and robust U.S. economic data.

Evelyn Gomezerichti, a multi-asset strategist at Mizuho, told the FT that investor sentiment had deteriorated as oil prices rose again. She said that because of high volatility in the bond market, even long-term investors such as pension funds are hesitant to buy despite higher yields.

U.S. Long-Term Bond Yields Rise...Mortgage Rate Also Hits 7.49%

The impact of rising Treasury yields is also spreading to the U.S. housing market. According to data released on Oct. 7 by the Mortgage Bankers Association (MBA), the contract rate for 30-year fixed-rate mortgages for the week ended Oct. 2 rose 19 basis points from the previous week to 7.49%. It climbed for a seventh consecutive week, reaching its highest level since November 2023. The increase over the past three weeks was about 0.5 percentage point, marking the steepest rise since early 2023.

Rising yields on 10-year U.S. Treasuries, which have a significant influence on mortgage rates, are also increasing homebuyers' financing costs. High home prices and mortgage rates are limiting a sustained recovery in sales of both existing and new homes. The MBA's index of applications for loans to purchase homes fell 2.1% from the previous week to its lowest level in more than a year. The refinancing applications index also dropped 7.5%, extending its decline since mid-August.

Investors will gauge demand for bonds at the higher yield levels through U.S. Treasury auctions. The U.S. Treasury will auction $39 billion in 10-year notes on Oct. 7 and $22 billion in 30-year bonds on Oct. 8.

Investors are also watching the minutes of the U.S. Federal Reserve's (Fed) September Federal Open Market Committee (FOMC) meeting, due for release on Oct. 7. After the Fed raised its benchmark interest rate last month for the first time since 2023, markets are watching for policymakers' assessments of inflation and economic conditions, as well as clues about further rate increases.

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