US Treasury yields experienced a significant increase, with the 10-year Treasury note yield reaching 5.05%, its highest level since July 2007. This sharp rise, up 113 basis points from its March low, followed the release of September's flash PMI data, which substantially exceeded forecasts and saw the composite PMI hit a five-year high. The robust economic data bolstered expectations that the Federal Reserve would implement another rate hike.
Simultaneously, the 2-year Treasury yield also climbed to a 27-month high. This upward movement in yields was further supported by hawkish comments from Federal Reserve officials. Richmond Fed President Tom Barkin warned about persistent inflationary shocks, while Boston Fed President Susan Collins expressed support for recent rate hikes due to concerns that inflation might remain above the 2% target. Markets are currently pricing in a 53% to 54% probability of another Fed rate increase in October.
Despite the rising yields, oil prices saw some fluctuations. Initially, oil prices rose due to geopolitical tensions, but later declined after US President Donald Trump indicated that US and Iranian representatives had held positive talks at the United Nations, easing some inflation concerns. US stock markets, however, fell on Wednesday as investors processed these developments and the increased likelihood of further monetary tightening.
