The yield on the 10-year US Treasury note climbed to 4.9% on Thursday, driven by surging energy prices that strengthened expectations of another Federal Reserve interest rate hike. Fresh data showed US producer prices rose 0.4% month-over-month in August, as a sharp increase in energy costs combined with signs of broader cost pass-through across multiple sectors.
The data release coincided with a renewed rally in crude and refined product prices, amid escalating tensions between the US and Iran in the Middle East. The resulting disruption has prolonged tanker blockades in the Persian Gulf, forcing major economies to rebuild depleted oil inventories.
Yields moved higher despite the Treasury’s decision to triple the size of its notes and bonds buyback program today. In addition to higher energy costs, long-term borrowing rates have been underpinned by a record wave of corporate bond issuance, with AI-related companies alone raising more than $1.5 trillion in new debt. Further upward pressure has come from Japan, where yen weakness has prompted Tokyo to repeatedly sell US Treasuries in order to defend its currency.
