FX.co ★ US 10-Year Yield Rises to 8-Month High

The yield on the 10-year US Treasury note climbed above 4.4% on Tuesday, its highest level in eight months, as mounting inflation risks and expectations of higher deficit spending linked to the war in the Middle East pushed rate forecasts higher. Reports indicated that the US has deployed additional troops to the region, contradicting earlier expectations that Washington was prioritizing de-escalation, while military exchanges in the area have continued. Benchmark oil and gas prices also advanced, heightening concerns about a renewed uptick in inflation shortly after the latest PPI report had already signaled firmer wholesale price pressures. These pro-inflationary developments contributed to last week’s FOMC projection showing less scope for interest rate cuts ahead. On the fiscal front, the White House has called for increased military funding on top of an already expansionary spending package. As a result, the latest 2-year Treasury auction tailed by 1.8 basis points, with primary dealers absorbing 24.12% of the issuance—the highest share since 2022.