US Treasury yields extended their climb on Thursday as rising oil prices fueled inflation worries and increased expectations of a Federal Reserve interest rate hike. The yield on the 10-year US Treasury note rose more than 2 basis points to 4.8589%, maintaining a level close to its three-year high. This benchmark yield is crucial as it influences interest rates for mortgages, auto loans, and credit card debt.
The 2-year Treasury note yield, which is more sensitive to the Fed's short-term rate decisions, also increased by 1 basis point to 4.4404%. The 30-year Treasury bond yield, often influenced by broader geopolitical risks, climbed over 2 basis points to 5.3092%. These movements occurred ahead of key wholesale inflation data and ongoing concerns about renewed hostilities between the US and Iran, which are pushing energy prices higher, with West Texas Intermediate futures rising over 1.3% to $97.37 per barrel.
The increase in yields was also partially attributed to market disappointment with the Treasury Department's announced $6 billion buyback of longer-dated government bonds. While this amount was three times larger than previous buybacks, some investors had anticipated a more substantial intervention, expecting $10 billion or more. Analysts, including Patrick O’Hare of Briefing.com, suggested the market might view the buyback as a "shell game" that doesn't address underlying issues with US public finances. This disappointment, coupled with surging oil prices, is putting pressure on the Federal Reserve to consider further rate hikes to combat persistent inflation.
