The US 10-year Treasury yield traded near 5.3% on Thursday, while the 30-year yield hovered around 5.64%, with both reaching their highest levels since 2002 amid concern that persistent, energy-driven inflation could force the Federal Reserve into tighter monetary policy. In recent weeks, deteriorating fiscal conditions, mounting US government debt, and weaker-than-expected bond buybacks have also pressured the Treasury market.
Oil prices remain elevated as negotiations between the US and Iran show little progress, despite signs of recovering crude flows from the Middle East, heightening inflation risks. Meanwhile, data released Wednesday showed the US PCE price index rose 0.3% in August, below expectations for a 0.4% gain, while core PCE increased 0.2%, undercutting forecasts of 0.3%.
Following the PCE report, markets now assign roughly a 38% probability to a Federal Reserve rate hike in October, down from 51% before the data release. Investors are also awaiting weekly jobless claims on Thursday and the September employment report on Friday for further signals on the economic and policy outlook.
