The yield on the US 10-year Treasury note hovered around 5.23% on Wednesday, close to its highest level since 2007, while the 30-year yield rose to about 5.62%, a level last seen in 2002. Yields stayed elevated amid persistent, energy-driven inflation, a still-robust US economy, and hawkish comments from Federal Reserve officials that reinforced expectations of additional interest rate hikes.
Fed Governor Michael Barr reiterated that further rate increases will likely be required to bring inflation under control, while New York Fed President John Williams said another hike “late this year” could be appropriate. Futures markets are currently pricing in nearly one full percentage point of additional Fed tightening over the next 12 months.
Investors are now looking ahead to Wednesday’s release of the PCE price index—the Fed’s preferred inflation gauge—followed by Friday’s closely watched monthly jobs report, both of which could strengthen expectations for further policy tightening.
