At the start of the final quarter of the year, the yield on the US 10-year Treasury note rose for a fourth consecutive session, reaching 5.33%, its highest level since early 2002. The yield on the 2-year Treasury note, which is more sensitive to expectations for near-term Federal Reserve policy, climbed to 4.91%. Meanwhile, the 30-year Treasury yield, which responds more to longer-term inflation expectations as well as fiscal and geopolitical risks, advanced to around 5.67%, also the highest level since 2002.
The bond market remains under pressure on expectations that the Federal Reserve will need to tighten monetary policy further, as persistent inflationary pressures are fueled by higher oil prices and the ongoing conflict in the Middle East. In addition, concerns about the US fiscal and debt outlook, combined with resilient economic data, are contributing to the upward momentum in Treasury yields. Market participants have already priced in an additional Fed rate hike this year.
