The yield on the US 10-year Treasury note inched up to 5.26% on Friday, after a volatile session on Thursday in which the benchmark yield retreated 6 basis points from its highest level since 2002. Investors continued to monitor developments in the Middle East and weigh their potential impact on energy prices and inflation. Oil prices eased after US President Trump pledged not to launch an attack on Iran before the midterm elections.
Even so, markets continued to factor in the risk that the Federal Reserve may need to keep interest rates elevated for an extended period to counter persistent inflationary pressures. Futures pricing indicated an approximately 81% probability that the Fed would leave rates unchanged at its upcoming meeting, while the odds of a 25-basis-point hike in December were around 69%. For the week, the 10-year Treasury yield was about 5 basis points lower.
At the same time, strong demand at this week’s 10-year and 30-year Treasury auctions signaled that investors remained prepared to buy longer-dated US government debt despite the recent sell-off.
